Andrew McBarnet detects a shift of emphasis in the marketing of marine seismic.
The marine seismic industry is well used to the cyclical nature of its operations, but could currently be described as being in something of a state of limbo. This is because the upcycle which on all the indicators was anticipated to begin sometime in 2010 has been interrupted.
At the beginning of the year, management of the leading seismic contractors were all cautiously optimistic that the recessionary forces which made 2009 such a challenging year were finally in abeyance. There were indications that oil companies were looking to increase their exploration budgets, if not hugely at least enough to clear some of the clouds affecting demand for marine seismic surveys. Fleet reduction measures taken by the likes of CGGVeritas and Petroleum Geo-Services (PGS) were also seen as a positive contribution to maintaining some semblance of balance in the global seismic fleet, thereby avoiding the overcapacity issues which have plagued the business in the past. In the same vein some newbuilds were either cancelled or deferred.
Into the third quarter of the year we can see that worldwide marine seismic activity is ticking over at best, and is showing little sign of an imminent upturn. The cause of the disruption to the cycle is of course the after-shock from the Deepwater Horizon disaster, the full impact of which is still unknown as far as the seismic community is concerned. Pending further deliberations by the Obama administration, uncertainty reigns with regard to future deepwater operations in the Gulf of Mexico. The general feeling is that it could be another six months before there is any clarity. Meantime oil companies have been forced into an involuntary reassessment of their E&P resource planning. The general assumption is that investment will be redirected to other parts of the world while the Gulf of Mexico hiatus persists, but this will not be reflected in seismic exploration spending until next year.
These unforeseen changes in market forces have conspired at a particularly frustrating time for the marine seismic contracting world which is arguably entering a new phase of competition. During the most recent boom years, roughly from 2005-08, the emphasis was on expanding capacity to meet burgeoning demand. That period is now over, and the focus has shifted back towards capability with companies seeking to differentiate themselves through their acquisition and processing technology offerings – with some distinctive results.
We are currently witnessing the tail-end of the surge in construction that took off in 2007. At that time the established contractors were making serious money on the back of soaring demand providing the opportunity to upgrade their seismic fleets through newbuilds or conversions. Companies had been making do with vessels built in the early 1990s that, with the notable exception of the PGS Ramform units, were not ideal to accommodate advances in acquisition technology. At the same time a number of newcomers, mainly on a wave of enthusiastic Norwegian stock exchange investment, were busy introducing seismic vessels to take advantage of the favourable market conditions.
Fleet growth
The additional high-end 3D seismic vessel capacity still to be introduced this year and into next year is actually quite substantial. The latest ship to be launched last month was the CGGVeritas Oceanic Vega. Sister Oceanic Sirius is due out in September 2011. This pair are being built by Drydocks World-Dubai to the SX120 design of Norwegian company Ulstein Design & Solutions using the distinctive X-Bow shape which is said to offer reduced noise and vibration, better fuel consumption, and the ability to perform in more turbulent sea states than a conventional seismic vessel. The Oceanic Vega, with a towing force of 140 tons during seismic operations, has been exclusively adapted to accommodate solid streamer arrays manufactured by CGGVeritas subsidiary Sercel. The vessel is being targeted for acquisition of large 3D, 4D and high-resolution projects, with a streamer configuration of up to 16 streamers separated by 100m or more. The vessel's 20 winches are each capable of spooling 9km of streamers.
The Drydocks World-Dubai/Ulstein combination has in fact received considerable patronage from the marine seismic business in the last few years, much of which is now coming to fruition. Last month saw the naming ceremony of the WG Cook, the second SX124 Ulstein X-Bow design seismic vessel for WesternGeco ordered from the yard. The WG Tasman was delivered earlier this year. In addition, the evolving pureplay marine geophysical contractor Polarcus is gradually taking possession of its Ulstein X-Bow design vessels from the yard. The first 12-streamer vessel Nadia began work in January and has been followed by the Naila allowing the company to record its first profitable quarterly operating margin. The 12-streamer Asima, the third of four vessels in the initial programme, comes out this month after a delay due to a propeller shaft fault found and rectified during pre-commissioning tests. The fourth quarter will see the rescheduled launch of the six-streamer Samur. Polarcus also has first option on two further vessels, Alima and Selma, due for completion in 1Q 2011.
Meantime the troubled orders for four vessels originally placed by Arrow Seismic from the Factorias Vulcano shipyard in Vigo, Spain are coming to fruition in rather different circumstances than could have been envisaged three years ago. Arrow Seismic was a company created by GC Rieber Shipping and spun off on the Oslo Børs. Its purpose was to establish a fleet of seismic vessels, to which end it invested in four newbuilds from the Spanish yard. As the squeeze tightened on available capacity PGS made a move for Arrow Seismic in late 2007, regarding it as a chance to acquire immediate vessel availability consisting of two operating 3D units plus three 2D/ source vessels under conversion (which would be attractive for wide-azimuth surveys being planned). The prize, however, was thought to be the four 10-12 streamer high tech 3D vessels being built in Spain, two of which had been ordered by WesternGeco.
Things did not turn out well, with PGS ending up cancelling the ships destined for WesternGeco due to construction delays, leaving just two remaining to be built for its own fleet. The company has in fact just taken possession of the PGS Apollo and will in due course also accept the PGS Artemis. Until very recently there was a question mark over the fate of the two cancelled newbuilds – NB 532 and NB 533 - originally ordered from Arrow Seismic (PGS) but now languishing incomplete in the Factorias Vulcano shipyard.
In a twist so good it could not have been invented, GC Rieber Shipping, the company which ordered the vessels in the first place, has stepped forward and bought them for about NKr850 million financed through a combination of equity and debt.
The company's CEO Sven Rong has virtually admitted that the price agreed was a steal. He said: ‘The price level for the investment in NB 532 and NB 533 is considerably lower than comparable vessels, which is expected to represent a competitive advantage.' Rong stated that the company had sold its 2001-built subsea vessel Polar Queen to Acergy with a net cash effect sufficient to cover most of the equity required. The divestment of Polar Queen and acquisition of NB 532 and NB 533 will result in a more equal balance between the subsea and marine seismic segments of Rieber, according to Rong.
It is not clear quite how Rieber will manage its latest assets, but when these vessels are finished they will represent extra competition at the top end of the market for 3D towed streamer seismic surveys.
Not to be left out, Fugro is in the process of adding the final two units in its vessel renewal programme. In March this year Fugro formally took delivery of a newbuild seismic survey vessel, the Geo Caspian, which is on long term charter from ship-owner Volstad Maritime. It is the third C-class vessel in a series of four delivered to Fugro since 2007 capable of towing 16 seismic streamers. The final C-class vessel, Geo Coral, is due to be delivered to Fugro this month.
The only other significant addition to the worldwide seismic fleet in the near future seems likely to come from Chinese company BGP which has indicated from time to time that it intends to expand its marine seismic business currently confined to four seismic vessels, none of which offer leading edge acquisition technology. Given the success that BGP has had with its land seismic operations, building itself into by far the largest provider, no-one questions their marine seismic aspirations, it's just a question of when and how. There is of course some speculation that BGP's current joint venture with ION Geophysical pooling their land seismic interests into a new company called INOVA Geophysical Equipment may act as a springboard for cooperation (or more) on the marine side.
Dollar diversions
By next year we can expect to see the size of the worldwide marine seismic fleet show signs of stabilising. What contractors could not have predicted in their calculations when investing in new capacity two of three years ago was that a prime chunk of the high end market for 3D seismic surveying, namely deepwater exploration in the Gulf of Mexico, would be jeopardised by uncertainty stemming from the Deepwater Horizon incident. It seems inevitable that oil companies are going to fight shy of E&P commitments in the Gulf of Mexico until the Obama administration clarifies the conditions for sanctioning new and ongoing E&P;deepwater operations. As a consequence some significant E&P dollars are going to be diverted to exploit potential assets elsewhere in the world, affecting the equilibrium of the marine seismic market just when it was hoped that an upturn in the market cycle would take care of any potential over-capacity pressures on pricing and operating margins.
The next few months are going to provide an interesting test of marine seismic contractors' marketing assumptions about what oil companies want from them. The seismic community has been focused on how to provide oil companies with higher resolution imaging of prospects and reservoirs at an acceptable, read lower, cost. The thinking is that oil companies need the best data possible in order to optimise E&P strategies for increasingly hard to find and produce hydrocarbons. Fleet upgrades have been directed at this objective. For example, the ability to tow large solid streamer arrays, which are more robust and produce less noise than the previous oil-filled cable option, is integral to the new generation of seismic vessels. Fuel economy, improved performance in difficult operations, and environmental and safety enhancements are also important features in the newbuilds of the last few years which are assumed to be attractive to oil company clients.
It is safe to say that oil companies now have quite a broad choice of newly constructed seismic vessels from the major contractors and others, all purporting to offer similar competitive operational performance. This is perhaps why seismic contractors are now laying more emphasis on the nature and quality of their particular acquisition and processing technology solutions in an intensive bid to differentiate themselves in the market.
In terms of branding, WesternGeco was way ahead of the field when it introduced the Q-Marine system some years ago offering companies a complete package for improved seismic imaging. Although Q-Marine won a following, it did not sweep the board for a variety of reasons. Early on the company was slow to provide convincing data results, fuelling a measure of oil company suspicion, and later the system was perceived as an expensive option possibly too tied to Schlumberger. More recently alternatives to one of its most innovative features, the steerable streamer for more accurate imaging in complex geological settings and repeat surveys for 4D seismic reservoir monitoring, have been developed by ION Geophysical and Sercel. Indeed ION is involved in an ongoing legal dispute effectively claiming WesternGeco stole its idea. Whatever the merits of that case, WesternGeco is expected to produce a second generation Q-Marine next year.
It should also be noted that WesternGeco offers some unique options for shooting seismic in particular circumstances, for example its Coil Shooting method to achieve full azimuth seismic data results with a single vessel following a circular rather than a straight line path. Such initiatives suggest to some observers that the industry is currently being swept along on a wave of the most important technology change in a generation. A case in point, PGS took some years to respond directly to the perceived demand for higher resolution imaging. It offered something called HD3D, but the company's high streamer count for seismic surveys was always its trademark, epitomised by its Ramform design vessel fleet. PGS eventually came up with the deep tow GeoStreamer dual sensor technology. The system has won plenty of plaudits from its oil company clients for the quality of the data acquired.
GeoStreamer has also been used in cooperation with the multi-client specialist company TGS.
But PGS is not stopping there. The company is in the process of developing what it hopes will be a superior steerable streamer with Kongsberg called E-Bird, designed to provide lateral, vertical, and roll control in marine seismic acquisition.
CGGVeritas through its subsidiary Sercel has introduced the Nautilus device which is said to provide acoustic positioning, depth control and automatic steering in one integrated unit. Nautilus is designed to regularise the spread automatically to give better 3D coverage, and also provide greatly improved 4D repeatability by combining this with feather-matching, depth control and more accurate steering to pre-plot positions. It claims that the combination of Nautilus and its industry-leading Sentinel solid streamer provides the quietest steered streamer available. The mischievous note that the company on at least one of its vessels has installed the ION DigiFin steerable streamer.
Meantime at the recent EAGE annual meeting in Barcelona (OE July), CGGVeritas launched BroadSeis which is an approach to marine seismic surveys combining the company's expertise in acquisition and processing to achieve an optimal broadband solution.
The question, then, is whether contractors investing in these innovative solutions will be rewarded in the intensifying competition for marine seismic business.
Common sense suggests that they should be. However, the reality check is that oil companies come in many shapes and sizes and, for some, sophisticated equipment offering stellar resolution of the subsurface may not be a priority, especially if it is costly.
In other words, cheap and cheerful may still have its appeal. OE