Exploration

Despite the US government having just taken leasing off the table for the Atlantic and most to the Eastern Gulf of Mexico and Alaska, at least through 2017, what seemed like a small ray of sunshine was announced right before the holidays. Following Secretary of the Interior Ken Salazar’s Dec. 1, 2010, updated energy strategy, which includes environmental assessment of geological and geophysical (G&G) studies in the mid- and south Atlantic planning areas, it was announced Dec. 17, 2010, that CSA International Inc. has been awarded a task order to develop the first G&G Programmatic Environmental Impact Statement (PEIS) for this region.
“The PEIS will evaluate potential environmental effects of multiple G&G activities, such as seismic surveys, that will be conducted to inform future decisions regarding oil, natural gas, and renewable energy development on the Outer Continental Shelf (OCS) in the mid- and south Atlantic planning areas,” a press release from the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) reads. “Seismic data is used by industry and BOEMRE to evaluate the potential for the safe development of offshore oil, natural gas, and non-energy mineral resources like sand and gravel. The data is also used for decision-making regarding the placement of offshore renewable energy infrastructure such as siting of wind turbines and to identify and protect benthic and archaeological resources and ensure a fair market value return for US taxpayers for energy resources developed on the OCS.”

The analysis will also support BOEMRE environmental compliance efforts with other applicable laws such as the Endangered Species Act, Marine Mammal Protection Act, National Historic Preservation Act, and the Coastal Zone Management Act.

The draft PEIS is expected to be made available for public comment in late 2011, and the final PEIS is expected to be completed in late 2012.

The question seems to be, why now? Salazar’s Dec. 1 announcement made it abundantly clear that no leases would be awarded in US Atlantic waters through 2017. If the PEIS identified reasonable environmental alternatives for Atlantic G&G activity at the end of 2012, it’s unlikely that seismic companies will rush forth to shoot non-exclusive data over an area that will lie fallow for at least another five years. Is this just an attempt to look like the government is doing something, anything, to placate its critics?

I asked Chip Gill, President of the International Association of Geophysical Contractors (IAGC), for his take on the announcement. He brought up three questions:

1. Why CSA? “They were the ones that prepared the 2004 Gulf of Mexico G&G Environmental Assessment, and it was very professional and thorough,” Gill said. “But it’s now the subject of litigation.” Apparently the Natural Resources Defense Council and other environmental groups are questioning the validity of the conclusions in that study.

2. Why limit the PEIS to only two of the three Atlantic planning areas? “Now that leasing is off the table through 2017, why not go ahead and cover the whole thing?” Gill asked. “Does the US government intend to restrict the siting of wind farms north of New Jersey? If you look at the megalopolis along the Eastern Seaboard, it certainly doesn’t stop at New Jersey.”

3. Who’s going to acquire Atlantic seismic surveys before 2018? “Director Bromwich says this work will enable BOEMRE to identify the resources that meet our nation’s energy needs. When we had the possibility of lease sales, the non-exclusive data companies in support of their E&P company underwriters were developing data acquisition projects on the Atlantic Outer Continental Shelf,” Gill said. “Now that leasing is off the table through 2017. From a practical standpoint I can’t see oil companies interested in underwriting a non-exclusive survey, and I can’t see geophysical contractors undertaking surveys on their own.” That means that any G&G studies conducted in the next six years would have to be paid for by the US government, a scenario that is both much more expensive than an industry-underwritten survey and quite unlikely.

Gill added that after Lease Sale 181, which would have offered up portions of the Eastern Gulf of Mexico for lease for the first time in decades, was canceled in 2001, contractors had to write off tens of millions of dollars of investment in non-exclusive surveys they’d already acquired but could no longer sell.

“Non exclusive data companies have recently ventured back into the Eastern Gulf of Mexico with several new data acquisition programs,” he said. “And once again the government has pulled the rug out from under them. After Secretary Salazar’s announcement, one would at least expect sales of that data to be delayed.”

But the IAGC isn’t the only organization opposed to the latest developments. Jack Gerard, president of the American Petroleum Institute (API), told a luncheon gathering Jan. 4 that his organization had hoped that the Obama administration would allow drilling in the Atlantic and the Eastern Gulf of Mexico. Salazar’s comments clearly reflect that this will not be the case. So the API is now aiming its considerable lobbying clout at Congress, asking them to put “specific language” in the Interior Departments spending bill that requires lease sales to be held in those planning areas.

Rep. Fred Upton (R-Mich.), the new chairman of the House Energy and Commerce Committee, spoke at that same luncheon. “We’ve got problems ahead of us that we’ve got to be prepared for,” Upton is quoted as saying in the Wall Street Journal.

Apparently not everyone came away from lunch with that special glow of fellowship, the article continues. T. Boone Pickens, never known for his subtlety, accused the API of representing foreign interests in a statement, while taxpayer advocates claim the industry is taking advantage of the struggling economy to “promote its own interests.”

If a change truly can be made to the recent no-lease decision, then the Atlantic G&G PEIS is a great step in the right direction. If not, it comes across as a feeble attempt to imitate forward progress.

Recently an industry pundit said to me, “I’ve told people that if I was going to go into the marine business, I’d go into the ocean-bottom cable business. Streamer is getting crowded.”

Yet streamer is exactly where one new entrant, Dolphin Interconnect Solutions, plans to go. Dolphin’s board hopes to raise new equity of approximately NOK 360 million (about US $58 million) in a private placement in what the company calls a “change of strategic direction.”

I’ll say. Dolphin is an IT company. But not to worry. According to the company’s website, “The board underlines that the current IT business will be continued and that it sees future potential in the current business. Furthermore, the board sees interesting synergies with the two business areas as the marine seismic industry needs considerable data processing resources to acquire and process seismic data, and Dolphin will [explore whether] the current data interconnect solutions can improve the performance in the seismic applications.”

The general plan is to establish a division within Dolphin that will focus on offering marine seismic services to the global oil and gas industry. The company hopes to establish a full range of marine geophysical services, including contract seismic, multiclient, and processing partnerships. It has attracted a management team with extensive industry experience to head and grow the new division. This team has access to a high-end fleet of seismic vessels, a group experienced in the multiclient market, and debt financing at attractive terms.

According to Dolphin’s chairman of the board, Atle Jacobsen, the decision was made due to the board’s sense that there would be strong demand for seismic services going forward. He added that the company has an agreement with GC Rieber Shipping to secure a high grade of vessel flexibility and low operational risk.

“The high-capacity vessels will not add to the already known industry streamer count,” he said. “The seismic industry is a people’s business, and I am very pleased that we have attracted a top-tier group of people with extensive experience from the seismic industry.”

Despite this assertion, Dolphin is receiving bids from equipment manufacturers for streamer packages.

So how can this newcomer compete with the big boys? The plan is to offer “the most cost-efficient vessels in the industry.” The new vessels will offer high capacity (14 streamers) and power on small, fast platforms that can rapidly move between jobs. It also hopes to time the arrival of its second newbuild 3-D vessel, NB 533, to coincide with “an anticipated strong recovery” in 2012.

Is 2010 the right time to start a new marine seismic company? Only time will tell.

If a study from the University of California at Davis is correct, we’ll have to.

Authors Debbie Niemeir and Nataliya Malyshkina postulate that long-term investors are good predictors of whether and when new energy technologies will become commonplace. Using that benchmark, they predict that oil supplies will run out 90 years before alternatives are available.

“Our results suggest it will take a long time before renewable replacement fuels can be self-sustaining, at least from a market perspective,” noted Niemeir, a professor of civil and chemical engineering, in a press release. The study is intended to be a tool that helps policymakers set realistic targets for environmental sustainability and evaluate the progress made towards these targets.

Key elements of the study are market capitalization based on share prices and dividends of publicly held oil companies and alternative energy companies. These elements have already been used by analysts to predict events in finance, politics, and sports, according to the press release.

Malyshkina, a post-doctoral researcher at the university, added, “Sophisticated investors tend to put considerable effort into collecting, processing, and understating information relevant to the future cash flows paid by securities. As a result, market forecasts of future events, representing consensus predictions of a large number of investors, tend to be relatively accurate.”

She concluded that stronger policy is needed to foster development of replacement fuels.

While this is a bit alarming, it also seems a bit chicken-and-egg to me. Are investors analyzing the true technical feasibility of these alternatives, or are they simply being protective of their investments by not going too far out on a limb? It is a commonly held belief on both sides of the climate change debate that alternatives and renewables have a great deal of promise but aren’t going to be economically feasible in the near future. But we’re talking a very distant future here. The world is not going to run out of oil any time soon, and if more of our energy needs can be met by natural gas, we’re not going to run out of fossil fuels for a very long time. Add 90 years to that distant date, and today’s savvy investors will be long gone, passing their investment portfolios on to their great-grandchildren.

If alternatives and renewables haven’t caught up by then, we’re in dire straits indeed.

First, my apologies to our international readers. E&P does strive to be an international magazine, but sometimes things going on in these here United States simply can’t be ignored.

So I guess it’s somewhat appropriate that on the day of our mid-term elections I find myself pondering the woeful state of political commentary in this country. I’m probably very late coming to this debate, primarily because I don’t watch a lot of television, particularly the kind that has political pundits spouting their views in shrieking tones. I’m sort of in the “why can’t we all just get along?” camp politically.

But this last weekend in Washington, D.C., comedian Jon Stewart held a “Rally to Restore Sanity,” at least partly in response to an earlier rally that conservative talk show host Glenn Beck held. My daughter attended the rally, which was televised, so of course we watched all three hours of it in the off-chance that we might spy her on TV (we didn’t). To be honest, I thought a lot of it was silly, with Stephen Colbert playing his alter-ego and pretending to push his agenda of fear, not sanity. But the last five minutes of the rally were worth the wait.

Stewart gave a brief speech outlining the purpose of the rally, and as part of his presentation, he showed sound bytes of some of the country’s most notable “pundits” basically screaming their heads off about something the other side had done, or not done. “The country’s 24-hour political pundit perpetual panic conflict-inator did not cause our problems,” he said. “But its existence makes solving them that much harder. If we amplify everything, we hear nothing.”

I’ll say. I may sound like I’ve had my head in the sand when I say this, but I had NO IDEA. The montage showed people from both sides of the political debate yelling at the camera and using incredibly derogatory terms to describe those who oppose them. This type of flap may be considered good entertainment, but it’s not the type of diatribe that the average American should hang his or her political hat on.

“The image of Americans that is reflected back to us by our political and media process is false,” Stewart said. “It’s like looking through a funhouse mirror – the kind where you have a giant forehead and an ass shaped like a month-old pumpkin. Why would you reach across the aisle to a pumpkin-assed, forehead eyeball monster?”

Americans live in a democratic society protected by rights such as the right to free speech. As a journalist, I hold that right very dear. As an American, I’m worried about the ways that others abuse it, hawking politics when they should admit they’re just entertainers (and not very good ones, sometimes). So what it boils down to is exactly what the rally was about – trying to restore sanity in a country where the inmates seem to be running the asylum.

With the Gulf of Mexico drilling moratorium lifted, the industry is cautiously attempting to regroup and get back to business as usual. But the International Association of Geophysical Contractors (IAGC) hopes that complacency won’t replace proactiveness when it comes to managing increased regulation and ensuring safe operations.

In a statement released at last week’s Society of Exploration Geophysicists annual meeting, the IAGC issued a statement noting that while the oil and gas industry recognizes the value of geophysical technology in reducing or eliminating environmental risks associated with drilling, regulators and governments might not, and this could affect changes to the current regulatory regime. “They could unnecessarily punish our industry in their rush to act,” the statement reads.

To respond to this concern, the association is launching a communications initiative aimed at reminding governments and the public of the importance of oil and gas and to educate them on how the industry can reduce risk by using geophysical technologies throughout the exploration and production cycle.

“The geophysical service sector utilizes seismic and other technologies to provide the empirical measurements that enable responsible oil and gas extraction to occur with a more complete understanding of the conditions in the earth’s interior,” the statement reads. “One clear solution to further reduce the risk of drilling involves high-resolution imaging that geophysical technology provides.”

In addition to current techniques, pore pressure methods could be more rigorously applied, the statement notes, and a wider use of microseismic fracture monitoring would help protect aquifers. Ultimately, broader applications of these techniques would lead to lower energy prices “as resources and deliverability are enhanced.”

Members of the geophysical community are asked to provide case studies showing how their technology is part of the de-risking solution. For more information, e-mail Chip Gill at chipgill@iagc.org.

I should probably subtitle this “working girl’s blues” – the annual meeting of the Society of Exploration Geophysicists (SEG) is, for geophysicists, a great time to come together and share their collective knowledge and wisdom. For exhibitors, it’s a chance to showcase their latest and greatest technology. And for me, it’s a job that I haven’t been physically qualified for since I was in my 20s.

But I’m not complaining. SEG is my favorite show of the year, and I’ve followed this industry almost my entire 15 years at Hart. I remember when our show dailies were sponsored by a single company, and any editorial that wasn’t about the show was about their products. Then we went to a more journalistic approach, allowing multiple advertisers in each day and sending more reporters to do live coverage. Back then (2000 or so), there were times that we weren’t even sure we’d have a show daily – times were so bleak for geophysical contractors that even an ad in a show daily was pushing their budgets. But then something wonderful started to happen. Contractors started to get more work, more mutliclient data sales, etc., and our dailies blossomed as a result. We went from barely scraping together eight pages to having to turn down editorial at 24 pages. And this shows no signs of stopping.

I attribute this not only to our crack sales staff (though I’m sure they deserve a ton of credit) but also to the industry in general. I heard a comment from a friend yesterday who had attended a Microsoft conference and said that the booths at SEG put those computer booths to shame. Somewhere, somehow, this conference has gotten it right in a big way, and those of us lucky enough (despite our aches and pains) to attend know we’ve got a good thing going.

To see more of Hart’s SEG show coverage, visit http://www.epmag.com/2010/October/item70782.php

My gosh, you wouldn’t believe what I just found out – oil companies are funding university research! That of course means that the results are skewed to line their filthy, greedy pockets.

Seriously. I get so tired of this! This is the third or fourth e-mail I’ve gotten implying that academia will throw objectivity to the wind if their research is funded by the majors. I don’t know if these all come from the same group of knee-jerk reactionists, but it would be funny if it weren’t so misguided and downright stupid. Here’s a sample of the breathless accusations included in a recent report:

“The world’s largest oil companies have funded at least $800 million of potentially compromised research at American universities over the last decade … based on a detailed analysis of university-industry contracts. Chevron, BP, ConocoPhillips, Royal Dutch Shell, and ExxonMobil – members of a group of major energy firms informally known as ‘Big Oil’ – have underwritten research at top-tier universities with few contractual protections for objectivity or scholarly independence.”

Despite the fact that this has been going on for at least a decade (and, in fact, a lot longer than that), this relationship between industry and academia is referred to as a “disturbing trend.” About the only positive aspect of is that it encourages more US government research involvement, a pattern that has paid off well for countries like Canada, Brazil, and Norway. It also notes that the “disturbing trend” is the result of a dramatic drop in federally funded energy research in the US.

True enough. But to imply that a lack of government oversight equals a lack of objectivity and sound science is a slap in the fact not only to the oil companies but to the universities as well. Yes, the oil industry funds directed research to find a solution to a problem. And either the solution works, or it doesn’t work. I’m hard-pressed to see what’s so sinister about that. Some of the best technology being used today is in part due to joint research. New technology that finds oil and gas while reducing the environmental footprint and keeping gasoline prices affordable – yep, pretty scary stuff.

I wonder if the report also investigates the “science” behind climate change that has proven, time and again, that scientists were motivated more by politics than common sense. That’s a report I’d like to read.

To learn more about “Big Oil Goes to College,” visit www.americanprogressaction.org.

“The events of April 20 triggered an environmental catastrophe of historic proportions, a catastrophe that propelled the nation into unknown territory,” said Dr. Jane Lubchenco, addressing the American Bar Association’s Section of Environment, Energy, and Resources Law Summit in New Orleans Sept. 30.

Lubchenco, National Oceanic and Atmospheric Administration administrator, outlined the technological challenges of stopping and tracking the release of hydrocarbons into the Gulf of Mexico. “Let me be clear,” she said. “Despite these unknowns, the entire federal family … is deeply committed to understanding the impact of this spill on the health of the Gulf and the millions of people who depend on it for their lives and livelihood, and we are committed to full restoration of the Gulf and its people.”
For an full transcript of Lubchenco’s speech, visit http://www.noaanews.noaa.gov/stories2010/20101001_lubchenco_seer.html.

Conventional wisdom says that you don’t need seismic in shale plays because you already know where the shale is. But some shale operators know better.

A few years ago a colleague at Hart told me that nobody was shooting seismic in the Barnett. I happened to know of several surveys that were ongoing at the time, and it surprised me that this kind of thinking prevailed.

But I think things are starting to change.

Sept. 29, for instance, I moderated a webcast sponsored by ION Geophysical titled “The Power of Seismic – Unlocking Unconventional Reservoirs.” Oct. 13 I will moderate another webcast, sponsored by Geokinetics, titled “Marcellus – Enhancing ROI Through the Use of 3-D Seismic Data.” And as I edit articles that will run in the SEG dailies next month, I notice the theme of the importance of seismic in shales repeated over and over.

So why the reticence to admit that seismic plays a role in these reservoirs? The jargon of geophysics may be part of the problem. Terms like “azimuthal anisotropy” are not part of the vernacular of your standard completions engineer. The fact is that anisotropy and shear wave splitting can speak volumes about fracture density and orientation. But it’s sometimes hard to get that point across.

What’s needed is a willingness on both sides of the geophysical divide to understand that seismic adds value, how it adds value, and why it adds value. Maybe our webcasts can help.

To view the ION webcast, visit https://secure.oilandgasinvestor.com/webinars/?eventid=64&where=E&P. To view the Geokinetics webcast, visit https://secure.oilandgasinvestor.com/webinars/?eventid=70&where=E%26P. And to read articles in the SEG daily, pick up a copy at the show or visit our website between Oct. 17 and Oct. 20.

Geophysicists couldn’t practice geophysics without models. Models help to confirm an interpretation and also to predict responses.

But typically models are used to solve a single problem or answer a single question to move on to the next step. Public domain models, on the other hand, tackle thorny geophysical problems that plague the entire industry.

Bill Abriel, a geophysical consultant with Chevron and part of the SEG Advanced Modeling Corp. (SEAM), discussed the importance of public domain models at a recent gathering of the Geophysical Society of Houston. While proprietary models focus on a proprietary problem, he said, public domain models work on a general problem. They maximize the number of researchers, increasing the likelihood of coming to a solution, and they provide a platform for common discussion. Additionally, they provide a focal mechanism for teaching, becoming an icon for the “problem du jour.”

They can also have a profound impact on the science of geophysics.

The French model from the 1970s, for instance, provided a way to illustrate geophysical theory to geologists, but more importantly it advanced the cause of 3-D seismic acquisition, which at the time was considered expensive and not particularly useful. The Marmousie model promoted the concept of time and depth migration while advancing the development of 2-D tomography, imaging, and inversion. It’s still considered a standard benchmark in the industry.

The SEG/EAGE salt model has been widely used for testing algorithms to image beneath salt and has led to the development of technologies such as reverse time migration. And the SMAART joint venture has led to advanced surface-related multiple elimination, which has in turn led to the advancement of wide-azimuth acquisition and processing.

The SEAM project hopes to continue this kind of impact. Already Phase I is complete, although an additional investment by the Research Partnership to Secure Energy for America (RPSEA) has allowed it to add additional goals to that phase. Phase I has resulted in a 3-D Gocad model, an acoustic benchmark, 200 terabytes of simulated acoustic data, and clastic data subsets. The RPSEA money will allow researchers to examine absorbing boundaries, gravity, tilted-transverse isotropy, elastic simulation, controlled-source electromagnetics, and magnetotellurics as well.

Phase II will focus on land seismic and the host of issues it presents, including fractured shales, desert topography, karsts, glacial areas, volcanics, and dunes.

SEAM currently comprises 23 “participant” companies, both oil and service, which provide US $100,000 over a two-year period plus the brain power of their people. “We have 23 dedicated companies that want to solve hard problems,” Abriel said.

To learn more, visit www.seg.org/seam.