It happened in Vegas

January 4, 2013

Andrew McBarnet finds an optimistic atmosphere at the recent SEG annual international meeting in Las Vegas.

cityscape

Judging from the mood of the crowd at last month’s SEG Annual International Meeting, the marine seismic business is in a good space. This wasn’t just because the venue was Las Vegas. In fact some exhibitors at the event were worrying that Vegas sent out the wrong signals. The word was that some seemingly sanctimonious oil companies wouldn’t expense staff to visit, apparently worried that they would be distracted by what locals call ‘the city of lost wages’.

Whatever the merits of that theory, the energy of the gathering was positive – as it should have been. The litmus test of well-being really boils down to current market conditions and the outlook. In this respect the general view was that there is enough work for the world seismic fleet for the time being with most companies reporting healthy backlog. It’s less clear whether ‘enough’ can convert into a significant increase in prices rather than the more likely scenario of a slight edging up, either of which is welcome.

Common sense would suggest that oil company spending on marine seismic worldwide, already strong, cannot be expected to increase dramatically. It would therefore require some rationalisation of the global seismic fleet, i.e. shrinkage, to affect much change, and that is unlikely to happen.

suadiMiddle East R&D collaboration: Saudi Aramco and CGGVeritas officials in the frame.

Petroleum Geo-Services (PGS) kind of proved the point on its booth by showing off one vision of future seismic, which is actually only a few months away. That vision consists of the two quite enormous Ramform Titan class vessels currently under construction at a Mitsubushi shipyard in Japan due out in 2013, with an order for two more recently confirmed by PGS for 2015. Although nominally timely upgrades to the company’s seismic fleet, it’s hard not to regard them as significant additions to global capacity.

It has been the enduring PGS strategy to view their seismic vessels as data harvesters intent on gathering as much data as possible in one go. Since the mid-1990s the Ramform design vessels have led the way in sheer productivity, always ahead in the number of streamers that their vessels could tow and hence the amount of raw data that can be collected. When the conditions are right PGS says its Titans will be able to tow 24 streamers, each 12km long, with a space between the cables of as little as 25km. The dimension of the back deck provides some idea of the scale we’re talking about: it measures some 70m across. The whole vessel would not fit onto a full-size soccer pitch. The seismic coverage that these monsters can achieve in just one pass is impressive to say the least, as is the technological feat involved.

PGS realises that such a major asset needs to keep operating with as little interruption as possible, because lying idle is a prohibitively expensive option to be avoided at all costs. The vessel is built with a great deal of redundancy, so that the company expects to keep its Titans out of port for as long as possible with maintenance including barnacle cleaning, fuelling, and crew changes all carried out at sea.

In a post-Vegas development not unconnected to the Titans, PGS has announced 10-year charter agreements with PF THOR for four seismic support vessels to be built at Besiktas in Turkey with an option for a further four. The purpose-built vessels will provide support for PGS’ fleet of seismic vessels during operation, covering offshore bunkering, crew change assistance, supply of provision and spare parts, as well as support during in-sea maintenance of the seismic equipment. Delivery of the vessels will take place from Q3 2014, replacing older, inefficient, capacity as well as adding necessary support for the new Ramform Titan class vessels. The range of capabilities includes ice class 1A, passenger capacity for transporting a full seismic crew, extra work boat, towing capability and ability to carry and transfer fuel oil at sea. Fuel cost savings of 60% are expected from the new vessel operations.

Fleet expansion

In terms of fleet expansion or upgrades, the other members of the Big Five marine seismic contractors which control 90% of the 3D seismic market have already declared their hands. WesternGeco is ordering two 127m built-for-purpose seismic ships from shipbuilder Flensburger Schiffbau-Gesellschaft (FSG) for 2014 delivery with options for another two from the German yard. Polarcus has made it pretty clear that it will stop at eight new vessels (one rented out to the Russian SCF group). The company is satisfied that this number of units can provide the global reach and flexibility to thrive in the sharply competitive global market for marine seismic. In any case it is hard to see even the most sanguine of investors being persuaded that Polarcus should be adding more capacity until it has built more of a track record, even if the company is thriving right now in the prevailing favourable conditions. The same is true of Dolphin Geophysical. It agreed to take on two speculative newbuilds from Norwegian company Sanco Shipping, and will by 2014 have a complement of five 3D and two 2D vessels to manage, probably enough for an investor-driven start-up that many suspect will soon be impatient to sell out while the going is good.

That leaves CGGVeritas which was very much part of the conversation in Vegas where news of its purchase of the major portion of Fugro’s geoscience division including the seismic fleet was still being absorbed. Assuming the deal goes through later this month or early in the New Year, there was consensus that the acquisition would enable CGGVeritas to shelve its immediate plans to order a further two vessels as part of a natural fleet evolution over time in which older units are phased out and replaced. The four flagship C Class Fugro vessels built in the last five years are a good fit as they are equipped with solid streamers from Sercel, the manufacturing arm of CGGVeritas.

Since the Vegas convention the rumour mill has been suggesting that CGGVeritas may have its work cut out to find work for its new capacity. This is based on an alleged lack of substantial backlog for the Fugro vessels, leading to wilder, speculation about the status of the deal. To listen to CGGVeritas CEO Jean Georges Malcor however, you would have no doubt that he has embraced the purchase as an opportunity for his company to realise its aspiration of becoming a fully integrated geoscience company with an unrivalled range of services.

What is not hearsay is that the deal has caused ructions in the Fugro boardroom. Just a few weeks after the $1.2 million sale agreement with CGGVeritas, Arnold Steenbakker resigned as chairman due to a difference of opinion on the future direction of the company. Official denials that his departure, less than a year after being appointed, had anything to do with the big sale can be taken with a pinch of salt. It is of course ironic that Steenbakker’s successor is Paul van Riel. He was the vice-chairman and board member responsible for the geoscience division now being divested. He joined the company in 2001 when his software company Jason Geoscience was bought by Fugro and many will remember him as a well-regarded president of the European Association of Geoscientists & Engineers.

While its competitors were uncharacteristically quiet, CGGVeritas seemed intent on making some noise in Vegas. It leveraged the occasion to launch BroadSource, its broadband marine seismic source to complement its StagSeis and BroadSeis broadband marine seismic solution, to produce enhanced images of the subsurface. In the recording of a full range of frequencies, a specially designed source seems to an important factor. PGS has GeoSource to complement its GeoStreamer broadband acquisition and WesternGeco’s recently introduced ObliQ using a variable streamer depth system operates with a proprietary source.

BroadSource is said to combine a synchronized multi-level source with processing algorithms that fit into the BroadSeis workflow to fill the source ghost notch. As such it is designed to generate the same low frequencies as a deep-towed conventional source but extend the spectrum to higher frequencies, providing better resolution and clearer images of the subsurface. The technology with a claimed bandwidth of 2.5-200Hz was trialled this summer in a project for Lundin Petroleum and is to be gradually deployed on the BroadSeis-equipped fleet.

Spicy collaboration

In Vegas CGGVeritas also gathered a big crowd for the official launch of its SpiceRack R&D collaboration with Saudi Aramco, having earlier announced a separate collaboration – with Baker Hughes – to provide geoscience input into improved reservoir management of shale gas projects. The idea of SpiceRack is that the two companies will work to develop, manufacture and commercialise a robotised solution for seabed seismic acquisition based on the deployment of self-propelled recording nodes. If realised, this project will certainly improve on current methods for operating nodes, which involve a deployment and retrieval system for shallower depths and the use of ROVs in deeper water.

nordicNordic Explorer: vessel for first PGS towed EM project.

Whether SpiceRack turns out to be the game-changer that CGGVeritas and Saudi Aramco were talking about remains to be seen. Further down the road there will presumably be some discussion about how the technology relates to the joint venture between CGGVeritas and Fugro on seabed seismic, proposed as part of the big sale. CGGVeritas is supposed to be putting all its seabed seismic applications into the venture in which Fugro will have a 60% controlling interest.

How long SpiceRack will take to develop, assuming it materialises, is obviously a matter of conjecture. One company which knows all about such speculation regarding innovation is PGS. In Vegas the company was being careful not to raise expectations about its long awaited project to produce the first towed cable system for acquiring electromagnetic (EM) data. In fact, following more trials, the first industry pre-funded survey using the Nordic Explorer took place this summer offshore Norway. Operation of the survey is said to have gone according to plan with preliminary data reported by CEO Jon Erik Reinhardsen to be ‘very encouraging’.

PGS is hopeful that the towed EM dimension will be a significant business opportunity. It is becoming the only company able to offer a survey package which includes a combination of seismic data with EM measurements. For the moment the capability is limited to 400m but the intention is to extend the technology to go deeper. The EM data from towed streamers may not quite match the results which can be achieved by conventional controlled source electromagnetic (CSEM) surveys as provided by the specialist Norwegianbased company Electromagnetic Geoservices (EMGS) using retrievable receivers placed on the seabed. However, an add-on to a seismic survey that may help to confirm or otherwise the presence of hydrocarbons will surely be an attractive proposition. There would seem to be good potential to develop multi-client offerings, especially given the sizeable seismic data library already accumulated by PGS.

Legal spoiler

About the only party spoiler at the SEG Vegas meet was the continuing undercurrent of concern about the implications of a lawsuit initiated by Schlumberger’s WesternGeco against ION Geophysical in June 2009. The company alleges that ION’s DigiFIN lateral streamer control system infringed several method and apparatus claims contained in four WesternGeco US patents regarding control systems for marine seismic streamer steering devices, which was one of the key innovations of the Q-Marine acquisition system introduced in 2004/5.

A jury in Houston found that ION willfully did infringe the claims contained in the patents and awarded WesternGeco the sum of $105.9 million in damages, consisting of $12.5 million in reasonable royalty and $93.4 million in lost profits. This comes as something of a surprise given the vigorous counter-claim launched by then ION CEO Bob Peebler. ION says it will be taking immediate steps to pursue all available legal options to overturn the verdict, including post-verdict motions and appeals. During the patent trial Fugro settled with WesternGeco on unannounced terms, which one can speculate may have been influenced by the company’s sale intentions.

There are a number of implications. First of all, for a company the size of ION, the scale of this award should it ever be confirmed would be hard to manage, especially as it has struggled over the last few years to develop a stable business. The wider question is the impact on the business of those companies using DigiFIN, which probably numbers most of the marine seismic industry. On its website ION refers to 25 systems deployed worldwide. For now the patent verdict only covers US waters which limits the potential liabilities.

Most fundamentally the lawsuit raises the issue of whether the whole concept of a steerable streamer falls under the WesternGeco patent. The final answer to that question may not be forthcoming for quite a while, however the uncertainty factor alone is unhelpful to business with contractors along with their existing and potential oil company clients unclear where they stand. OE



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