What is the lay of the land as TGS is turfed off?

All dressed up and nowhere to go is never a good feeling. But that's exactly what has just happened to − of all companies − TGSNopec. The acknowledged maestro of the multiclient seismic survey business last month put out a terse statement that the national oil company Sonangol had terminated its ‘negotiated' right to conduct multi-client surveys offshore Angola.

This sudden turn of events clearly took TGS by surprise because the company had just ordered in Fugro-Geoteam's flagship C-Class 3D/4D vessel Geo Caribbean (pictured) to carry out an extensive multi-client survey campaign in the region. Since it is stuck under contract with the vessel for several months TGS has had to make some hasty alternative arrangements.

The Geo Caribbean will now be working the Africa Transform Margin, north of Angola, off countries such as Sierra Leone and Liberia where TGS has already built a data library of around 20,000km². Such a last minute change of plan must have been costly as pre-funding of these unanticipated projects is bound to be problematic, certainly compared with a play as hot as offshore Angola. TGS has actually made light of the financial implications citing a ‘limited negative effect on revenues for Q3 and Q4', existence of industry funding, and being well positioned to carry out multiple surveys in the newly designated area.

There's been no public explanation of Sonangol's decision to terminate the TGS agreement, but Robert Hobbs, CEO of TGS, may have provided a clue in stating that ‘we look forward to being a part of future regional seismic campaigns in Angola'. This suggests that Sonangol is not ruling out all multi-client seismic surveys. It may, however, be moving to limit the scope of multi-client surveys over blocks that are in the process of being assigned, or are already earmarked in some way. In other words, multiclient surveys proposed over unlicensed areas which may come up in a future concession round are still acceptable. This is logical because in order to bid on fresh acreage, prospective licensees need some seismic data on which to base their valuations of the blocks on offer. Once a block is in play for licensing offshore Angola, it would appear that prospective partners (which invariably include Sonangol) will be expected to commission their own proprietary surveys.

The Angola setback does not come at a good time for TGS, which along with other geophysical services companies, has been adversely affected by the fall-out from the Deepwater Horizon disaster in the Gulf of Mexico. In fact TGS was the only seismic company which had to call a temporary halt to its seismic operations in the region because of its proximity to the accident. While it was held up for three weeks on its Justice wideazimuth (WAZ), TGS had to improvise by surveying an adjacent area. The Justice WAZ survey was completed in July as a northeast expansion of its Freedom and Liberty WAZ projects. The survey added more than 7800km² of WAZ coverage to the TGS portfolio and covered significant portions of the hydrocarbon rich areas of Mississippi Canyon, Viosca Knoll, and De Soto Canyon. Such an important addition to its data library would in normal circumstances be a post-survey data sales money spinner.

The old Guinness beer ad used to say that it refreshed parts that no other beer could reach; in the same vein WAZ coverage illuminates parts of the subsurface, especially subsalt, that no other towed seismic technology can see, and as such is in high demand from those companies which believe the Gulf of Mexico has plenty more hydrocarbon riches to harvest.

Time-honoured practice
A problem for TGS and others could be that the post-survey data sales of their WAZ coverage do not materialise as expected. A significant percentage of annual revenue for a company like TGS comes from last quarter sales of data. This is when E&P companies with any surplus budget at the end of the year typically spend some money on multi-client data that may come in useful in the future. There is no reason to believe that this time-honoured practice will not be repeated this year.

The question is whether Gulf of Mexico data, even from the latest high-tech WAZ surveys by TGS and other seismic companies, will be at the top of company shopping lists.

Much depends on whether two Gulf of Mexico lease sales scheduled for next year go ahead as originally scheduled before the Deepwater Horizon changed everything. A delay in the lease sales could mean less incentive for companies to buy any relevant WAZ data useful for assessing blocks advertised to be auctioned. Despite noisy petitioning from the oil industry lobby, the Obama administration has still to determine how it wants to regulate future Gulf of Mexico E&P operations.

The continuing hiatus certainly casts doubt on the timing of next year's Gulf of Mexico lease sales and thus a damper on the WAZ data sales for TGS and others. Come November/December, those oil companies with left-over money burning a hole in their pockets may prefer to invest in data elsewhere in the world.

TGS would still stand to win its share of this largesse as its portfolio of multi-client surveys is worldwide, but the pot may not be that big because US-centric companies, of which there are plenty in the Gulf of Mexico, would not be expected to invest in data from other prospects in the world. OE