What kind of summer will it be?

2012 was a big year for marine seismic in NW Europe. Andrew McBarnet asks whether we can expect a repeat in 2013.

The summer season offshore NW Europe is often seen as the bellwether of the marine seismic industry’s state of health. This was definitely the case in 2012, which saw exceptionally high survey activity reflecting a strengthening market. Not all the same conditions apply this year, which has left a bit of a question hanging over what can be expected. Not that anyone is suggesting that the seismic business as a whole is facing a reverse in its current fortunes far from it rates are said to be firm, evenrising, and vessel capacity worldwide is as close to equilibrium with demand as it is ever likely to be.

Andrew McBarnet

One of the more innocent explanations for talk of a less frenetic NW Europe this year may simply be a matter of vessel logistics in a global market place. Last year the region experienced the equivalent of swarming, with plenty of time-sharing agreements for company survey campaigns. In other words, it may be that there just aren’t enough boats to go around, or they are in the wrong place.

Plays now compete for the world’s seismic fleet, in West, South and East Africa, India, the Atlantic Rift and Caribbean, Brazil, Australia, and Asia Pacific, not to mention a revitalized, post-Macondo Gulf of Mexico. Contractors are always going to think carefully about the cost of transiting vessels from one region to another unless the prospect of good backlog is in the offing. WesternGeco and Polarcus, for example, have vessels committed to the SE Asian and Australasian markets, and are unlikely to be relocated to the Northern Hemisphere.

That said, some companies have jumped in early, possibly too early, given the prolonged winter conditions off NW Europe. CGG really pushed the seasonal limits by starting work in February on UK Quad 30 Phase 7 of its Cornerstone CNS dataset covering over 5500sq km in the Q29, 30, and 38 areas. The company is operating its Oceanic Phoenix with a 10 x 100 x 6000m long-offset streamer configuration deploying its BroadSeis and BroadSource technology.

The focus on broadband seismic is a key reason why oil companies continue to commission new seismic over areas that have already been shot many times over. As a point of historical reference, in June 2014, it will be 40 years since then- Secretary of State for Energy Tony Benn in Harold Wilson’s secondLabour government inaugurated the first UK oil from the Argyle Field, operated by Hamilton Bros.

Oceanic Phoenix: CGG s first vessel on the scene.

In subsequent decades, the UK has maintained a ”pedal to the metal” speed in its drive to produce its offshore oil and gas. As a result, the remaining pickings in the mature areas are assumed to be slim, but not so slim that the latest seismic might not highlight some previously unseen reserve possibilities.

Based on previous surveys in the region, CGG says that use of broadband in its Cornerstone project enables the imaging of thinner and more complex reservoirs from the deep Carboniferous-Permian section through the Jurassic and up to the shallower Paleogene targets, which could be an important solution for unlocking bypassed hydrocarbons in the Southern Central Graben.

Another early starter is TGS, which has started on two 3D multiclient surveys in the Norwegian Barents Sea. The Finnmark Platform 2013 (FP13 ) survey, covering 3500sq km, was started last month by the Geo Barents ship towing eight streamers. In the meantime, the Hoop to Fingerdjupet 2013 (HF13) survey, scheduled for early Q2, will cover 8600sq km deploying the Oceanic Challenger towing 12 streamers. Both 3D seismic surveys are said to cover areas of complex geology and are designed to address specific customer imaging requirements. TGS has no broadband acquisition capability of its own, but is using its Clari-Fi processing technology to meet customer appetite for broadband insight.

Dolphin Geophysical 3D seismic vessel Polar Duke is embarking on acquisition of its remaining 3D multi-client survey in UK Quads 29 and 30, expected to take five months with sister vessel Polar Duchess taking over some of the project when Polar Duke leaves for other pre-booked contract work. Dolphin is also playing up the broadband advantage, although it does not have the proprietary acquisition technology like the Big Three (Petroleum Geo-Services, WesternGeco, and CGG). Instead, Dolphin depends on a processing solution called SHarp BroadBand High Resolution. There is an acquisition aspect to this: the company says that 75m streamer separation is necessary to image steeply dipping salt flanks and faulting.

In a way, it’s strange that NW Europe should continue to be such a key focus. The UK and Norway have both slipped standings in the oil production league and no longer feature in the top 10. Any expectation of big finds that would potentially attract significant investment by the supermajors (preoccupied with finding “elephants”) is now mainly confined to some emerging areas off Norway, notably the Barents Sea. Some still believe that West of Shetlands could be a sleeper; west of Ireland remains to be properly investigated, and who knows what will eventually emerge from Greenland exploration.

Malcolm Webb, chief executive, UK Oil & Gas.

Of course, there is always the capacity to surprise. The most dramatic examples in recent years were the Avaldsnes and Aldous Major South finds in 2010 and 2011 by Lundin Petroleum and Statoil respectively, on the Norwegian Continental Shelf. Now renamed Johan Sverdrup, after a 19th Century Norwegian prime minister, the combined discovery is currently estimated to contain gross contingent resources of between 1.7 and 3.3billion bbl of recoverable oil, making it one of the five largest known accumulations on the Norwegian Continental Shelf. Icing on the cake is that the field is in 115m of water. The reservoir has excellent characteristics and oil quality, at a depth of less than 2,000m, and is close to existing infrastructure with spare capacity.

What seismic contractors are primarily looking for is sustained oil company E&P investment, that requires seismic survey support. The omens are still favorable in Norway and the UK, where, like the US Gulf of Mexico, there is a huge pool of operators and licensees, from super major to small independent, many of them playing in their own backyard. The human dimension of this proximity is not to be underestimated, in terms of closeness to home and family, and working in a familiar environment.

There are obvious business advantages of working offshore Europe, starting with stable, industry-friendly governments and orderly fiscal and regulatory regimes. That means access to everything from technology, equipment, and finance to people. The infrastructure accumulated during four decades of production enables otherwise marginal finds to be worth developing.

The Norwegian Petroleum Directorate (NPD) is predicting high activity in the next 5-years, with total production expected to remain about the same as in 2012. Thirteen new discoveries were made last year: five in the North Sea, five in the Norwegian Sea, and three in the Barents Sea. Forty-one exploration wells were completed.

NPD director general Bente Nyland summed it up recently: “The increase in the resource estimate and major new discoveries show that the Norwegian shelf still has some surprises left, and that there is good reason for continued optimism on behalf of the oil and gas activities in Norway.”

Oil and Gas UK, the representative body of the UK offshore oil and service companies, is singing from the same hymn sheet. Thanks to recent improvements in the tax regime, it says that more oil and gas reserves have become commercially viable for development. The number of projects submitted to the Department of Energy and Climate Change (DECC) and given development approval almost doubled between 2011 and 2012. The 33 projects that DECC has approved since January 2012 involve investmid- 2000s, with new developments reaching a low point in 2008-2009.

Commenting on a new survey of its members, Malcolm Webb, chief executive, UK Oil & Gas, said: “Only 21 exploration wells per year on average were drilled over the last three years. As a result, in 2012 not enough barrels were discovered to replace all those produced. However, again, there is real cause for encouragement as the survey results lead us to forecast 130 exploration wells over the next three years, which, alongside the use of new and improved sub surface technology, should result in many more barrels being discovered.”

While production may fall again slightly this year to 1.45–1.5MMboe/d, thanks to the recent surge in investment, a significant upturn can now be predicted over the next three to four years, rising to approximately two million boe per day by 2017 with significant benefits for the UK economy.

Five good years in prospect: Bente Nyland, director general, Norwegian Petroleum Directorate.

Investment confidence and encouraging activity levels are just from mature areas. The UK categorizes its licences into “traditional,” “promote,” and “frontier,” with “promote” designed to encourage innovative approaches to already well-explored areas. Norway has its Awards in Predefined Area (APA) program to serve a similar purpose, well supported by oil companies. Relinquishment strategies assure that there is extra acreage to consider.

New licensing translates into business for the marine seismic contractors with a trend toward multi-client, as opposed to exclusive, programs. In 2012, there was actually more multi-client than proprietary seismic shot in NW Europe, heavily influenced by surveys in the Barents Sea that were stimulated by Norwegian government licensing. Block sizes are also shrinking in mature areas, so it makes sense for oil companies to share survey costs.

This is a win-win situation from a contractor perspective, because economies of scale apply once a survey is up and running, especially if it is more vessel-intensive broadband acquisition. Prefunding for multi-client work is an important consideration that has to be weighed against other available options for the vessel and the likelihood of postsurvey data sales. In higher risk areas such as the Barents Sea where data is still relatively scarce, multi-client surveys look more like fully-funded group shoots.

With continued aggressive government licensing, program commitments will lead to a steady flow of seismic work. In producing fields, companies may opt for reservoir monitoring using 4D seismic. This will be a continuing source of work, although technical, geological, and economic factors all come into play. The use of 4D is more likely at better-resourced companies with the expertise to make best use of imaging from repeated surveys.

Overall, the fundamentals will keep oil companies ordering seismic offshore NW Europe. It’s just not clear yet how busy it will be in 2013. OE