The Irish Nobel prize-winning poet Seamus Heaney noted that ‘Even if the hopes you started out with are dashed, hope has to be maintained.’ It’s the kind of advice that should resonate with the seismic business as much today as over the past several...
The Irish Nobel prize-winning poet Seamus Heaney noted that ‘Even if the hopes you started out with are dashed, hope has to be maintained.’ It’s the kind of advice that should resonate with the seismic business as much today as over the past several decades.
Essentially high hopes have never been fulfilled for very long. The historical record is one of major promising technology achievements starting with the introduction of 3D seismic in the 1980s, followed by multi-streamer acquisition, sophisticated navigation and positioning, 4D reservoir monitoring, electromagnetics, broadband, node-based surveys on land and on the seabed, extraordinary advances in imaging and processing, etc.
Yet few geophysical service companies ever figured out how to reap the reward from investment in these extraordinary technical successes. Indeed their oil company customers have been the main beneficiaries enjoying more cost effective surveys at no extra price thanks to the competition between the providers. In addition, marine seismic contractors proved unable to manage the overhead of owning vessels and undertaking continuous research during the lows of the E&P investment cycle. Today, the only two substantial marine seismic contractors still standing are both laden with serious debt.
It was another poet, Alexander Pope, in An Essay on Man who cited the phrase ‘Hope springs eternal’. Pope embraced what some refer to as optimistic philosophy that can be traced back at least to Socrates. Maybe we can have cause for hope that the remaining players in the seismic business can look forward to an improvement in their lot.
Pre-pandemic there was evidence of an uptick in the E&P spending cycle with tendering for marine seismic work steady and prices firming. This seemed like the first signs of cautious new industry spending on reserves replacement after a long hiatus. That momentum obviously faltered as the pandemic disrupted the world economy. With a month to go in 2021, Rystad Energy reported that global oil and gas discoveries were on track to hit their lowest full-year level in 75 years. By the end of November, total global discovered volumes were calculated at 4.7 billion barrels of oil equivalent (boe), the lowest figure since 1946. It also represented a considerable drop from the 12.5 billion boe found in 2020.
All expectations of a likely resumption of spending in the post Covid era have been confounded by Russia’s invasion of Ukraine. We simply don’t know how the market is going to respond. What we do know for sure is that ‘energy security’ is now top of the energy policy agenda for many governments especially in Europe and North America where the price of heat and transport has soared stoking fears of inflation. As a result of this looming energy crisis and the dark shadow of an incomprehensible and brutal conflict, the latest scary report published in February from the UN’s Intergovernmental Panel on Climate Change (IPCC) received scant recognition. BBC News quoted Heleen De Coninck, professor of socio-technical innovation and climate change, Eindhoven University of Technology, warning that we’ve reached ‘the now-or-never point of limiting warming to 1.5C’.
Sooner or later the world would have woken up to the fact that the timetable for the replacement of fossil fuels was unrealistic but the current turmoil has hastened the process. The logical expectation is that oil companies will come to the rescue. Producing countries such as the UK, Norway and the US are already cutting the industry some slack in order to stimulate hydrocarbon investment.
On the other hand, OPEC+ countries have not shown much interest in erring from their disciplined oil quota strategy. OPEC Secretary General Mohammad Barkindo said in April ‘We could potentially see the loss of more than 7 million barrels per day (bpd) of Russian oil and other liquids exports ... Considering the current demand outlook, it would be nearly impossible to replace a loss in volumes of this magnitude.’ Barkindo also noted that the current highly volatile market was a result of ‘non-fundamental factors’ outside OPEC’s control. This was probably an allusion to the growing stand-off between the US and Gulf nations over stalled security talks on Iran’s nuclear ambitions, restrictions on arms supplies to the region and withdrawing support for the Saudi-led military offensive in Yemen. OPEC+ countries agreed in March to stop using International Energy Agency data in their supply/demand calculations deeming it to be too US-biased.
Hopes of oil companies stepping up could prove illusory. Analysts have been pointing out for some time that the market turmoil of the past two years has divorced the predictable correlation between rising oil price and the level of E&P spending. This is perhaps why Rystad Energy is cautious about the immediate prospects for the oilfield services sector which it notes has reported negative net income margins since 2015. Even if as much as $100 billion extra oil company investment surfaces this year, it would be unevenly distributed due to ‘widespread cost inflation and varying growth expectations’. It expects any new spending to come from ‘short-cycle upstream activities such as shale resources and infill drilling’. An obvious subtext is that oil companies are aware of the inflationary pressures and, in an uncertain market, are likely to focus on shareholder returns, their default position of the last few years.
Judging from recent statements from the leadership of Shearwater, PGS and CGG, there is some ground for hope. Any level of new work will be welcome. This is most likely to come from the strengthening demand for seabed seismic surveys and growing indication of a structural shift away from 3D towed-streamer acquisition. Tenders are either out or expected for major ocean bottom node (OBN) surveys in Saudi Arabia, Qatar and Kuwait. Brazil, Nigeria, the Caspian and Turkmenistan are either active or pending, and of course the Gulf of Mexico and North Sea have a continuous stream of projects.
To date the provision of equipment and services to this burgeoning market does not seem overcrowded. Magseis Fairfield and BGP Offshore have been the leading contenders. Shearwater is capturing an increasing share of work building on the Isometrix/Q-Seabed technology inherited from Schlumberger. At the EAGE Annual Meeting in June the company will probably be talking a lot about its Pearl node development. The unexpected success story has to be PXGEO, a regrouping from the now defunct Polarcus, which took over technology from Seabed Geosolutions, originally a merger between Fugro and CGG. The company is signed up for work in Brazil, Egypt and the North Sea. Axxis Geo Solutions, the opportunist start-up of a few years ago, has rebranded as Carbon Transition, sold its node-on-a rope handling system to Magseis Fairfield and changed focus, while SAExploration remains an outlier.
The market’s ability to supply sufficient OBN equipment to meet rising demand may prove an issue especially with supply chain disruption. Sercel, partnered by BGP, recently joined the ranks of equipment manufacturers with its GPR node. Magseis Fairfield, Geospace and Seabed Geosolutions have been the main providers. They will soon be joined by Shearwater (Pearl) proprietary nodes and by Norwegian company inApril, which after 10 years development, is finally investing in node inventory.
PGS continues to steer clear of major seabed seismic investment, maybe partly because of its stretched financial predicament. However, it recently announced further partnership with Sea Floor Geophysics to optimise use of P-Cable ultra-high resolution seismic technology and is already working with the company on reviving towed-streamer EM technology.
PGS and Shearwater are still heavily dependent for their financial fortunes on some form of recovery in the marine seismic streamer survey market. This remains obstinately stagnant leaving the headache of balancing how many vessels to keep active.
A closer look at long-time protagonists in the seismic business, notably CGG, ION Geophysical and TGS, shows clear indications of looking outside traditional markets to apply their technology base. Emblematic of the trend is the recent rebranding of the International Association of Geophysical Contractors (IAGC). In January the trade group changed its name to EnerGeo Alliance. This is said to convey ‘a recharged and ongoing commitment to providing solutions for the energy evolution as its members continue to discover, develop, and deliver the mainstay, low-carbon and alternative energy the world demands.’
It is perhaps mischievous to wonder whether EAGE’s sister geoscience associations, the Society of Exploration Geophysicists and the American Association of Petroleum Geologists, both undergoing some soul-searching about their future direction, will take IAGC’s rebranding as the cue to change their names. The oil companies set the trend with Statoil retitling as Equinor and Total Oil’s adoption of TotalEnergies. The UK oil and gas trade organisation Oil and Gas UK (OGUK) has just dropped the oil and gas and now refers to itself as Offshore Energies UK. Its chief executive Deirdre Michie said: ‘Oil and gas is still a fundamental part of what we do and how we do it, but hydrogen, carbon capture and storage, offshore wind. Those are all part of an integrated energy mix that we see being developed today.’ It begs the question whether members of the Petroleum Exploration Society of Great Britain (PESGB) feel they need to rethink their name.
Levity aside, the geoscience community and its associations are facing unprecedented challenges in trying to make sense of the global future of energy resources and the potential opportunities for careers and businesses. How much hope should be invested in the likely outcome is of course the big question. It seems certain that the application of geoscience expertise and application is likely to become more varied as the energy transition unfolds. To hope that the reward of contributing geoscience to the renewables world will ever match the oil industry in its prime is another matter. In other word, Seamus Heaney may have been a bit over-optimistic at his Nobel Prize award ceremony in advising ‘Walk on air against your better judgment.’
‘We know for sure energy security is top of the agenda.’
‘Hopes of oil companies stepping up could prove illusory.’
