Seismic Shifts In the Seismic Business – New Technology Confronts Old Perceptions – Read About the Changes – David Yager

By David Yager for EnergyNow
Energy Policy Analyst – Oil & Gas Writer

As the industry primarily focuses on petroleum prices, pipelines and profits, on the ground multiple oil service sectors continue to toil away at continuing to do the old job better. Nothing better describes the current state of Canada’s seismic industry which, regrettably, has in recent years gone from the leading edge of development of new oil and gas supplies to an afterthought by an increasing number of operators.

With production increasingly coming from known reservoirs like oil sands and resource plays (light tight oil and shale gas), too many exploration and production (E&P) companies don’t believe the value is worth the expense. Meanwhile, the geophysics industry has invested heavily in new data acquisition and processing technologies that have transformed seismic into an exploitation and production tool, not just one for primary exploration.

As customers focus on cost, they overlook the fact that more knowledge gained about the reservoir before investing in exploitation, development and production can still lead to a higher return on invested capital. As one seismic veteran quipped, “Who would do a complex medical procedure without an image?” Some operators believe that with production increasingly coming from known reservoirs (at least their location, if not their internal structure), all they need to know is how to do it cheaper. The seismic industry believes this focus on cost alone does not yield the highest levels of recovery or cost per produced barrel or mcf of gas.

While the role of seismic has changed, its existence as a key and fundamental component of the upstream oil and gas industry has not. This industry is doing some remarkable things with new technology. All they need to do to help their clients is talk to somebody other than the purchasing department.

Because it is viewed in as exploration tool in an industry that has quit exploring, the demand for seismic services in the WCSB has declined precipitously in the past decade to the point of the near-collapse of its historic business model. These factors include:

• The collapse of natural gas prices and natural gas exploration
• The move to “resource plays”, which use horizontal drilling to exploit extensive source rock directly, making the identification of traditional conventional targets increasingly less common
• The availability of public well data from the many thousands of wells to identify laterally extensive source rock characteristics
• The availability of large non-exclusive 3D surveys that were sparsely acquired and under-sampled
• The 2014 oil price collapse which has caused E&P companies to review all expenditures for cost, efficiency and necessity
• The significant reduction of the economic viability of all oil and gas operations in the WCSB due to commodity prices, market access issues, “made in Canada” prices (the lowest market-set oil and gas prices in the world), increased taxes, increased regulations, and growing public opposition to the existence of this industry
• The lack of Industry understanding and appreciation of seismic technological advancements, resulting in a lingering false perception that seismic is purely an exploration tool with limited value in exploitation and production operations
• Procurement processes that prevent open project discussions with clients and contractors
• Contractor investments in technology have increased recording productivity to the point where crews shoot low quality projects faster (reduced costs) yet have difficulty persuading clients to leverage technology to improve subsurface imaging through higher density projects

The impact on the seismic sector is particularly acute. The most common measurement of seismic spending and activity is the “active crew count”, the number of seismic survey and data collection crews in the field on a given day. At recently as 2012 there were 10 “recording” companies (in the field generating sound waves and collecting data) which did about 225 programs. This was the early days of the big resource plays like the Montney and Duvernay and operators wanted to know what was out there.

For 2018 there are only 3 recording companies left that will perform about 60 jobs. Every sector of oilfield service has endured major declines in the past six years. But the challenge for seismic is unique in that about half the business is compressed into eight weeks from mid-January to mid-March. This acute seasonality is something no other sector must endure, and it creates significant labor challenges on top of all the other business issues.

A major problem is the perception that seismic is primarily an exploration tool that has limited utility in shale plays. To the end of 2017 there had been over 530,000 wells drilled in the WCSB. Because of government requirements, most of these wells have been open hole logged, many have been cored, and rock cuttings have captured, recovered and catalogued.

Virtually all this data is on the public record and available to E&P companies. This has given modern oil and gas developers “well control” which did not exist in the earlier phases of development of the WCSB.

Further, all seismic data ever collected is stored and much of it is available from private companies for resale and/or reprocessing. If seismic is required, many E&P companies have concluded that they can purchase and review sparsely acquired existing data as a lower cost alternative to acquiring new data. This overlooks the vast improvements in data quality that have been developed.

Therefore, a growing number of E&P companies, particularly those focused more on cost than reservoir characteristics, no longer regard new seismic as a key component of the exploitation and production process even though newly acquired seismic data is vastly superior in quality, resolution and definition.

There are several factors that make the seismic industry as relevant today as it has always been, if not more so.

• Advancements in Seismic Technologies for Data Collection and Analysis – Early seismic testing was only able to detect the most obvious subsurface structures, such as large dome-shaped traps. Advancements in data collection, particularly in wireless recorders and recording instruments to collect data from more sensors, have dramatically increased the granularity and accuracy of the subsurface analysis and identification process while at the same time it has reduced the cost of the data acquisition and recording process. These new methods have allowed geophysicist to examine subsurface structures with a degree of detail that did not exist previously. One industry expert compares old 2D seismic to a black and white tube TV and modern 4D seismic to high-definition, 4K digital TV, light years ahead in quality and clarity. While the volumes of existing, sparsely acquired data are significant, their usefulness for today’s exploitation and production operators who want to look at the reservoir caprock or detailed rock properties within the reservoir is limited.
• Today’s Oil and Gas Recovery (introducing and relieving reservoir pressures) – Historically, oil and gas producing reservoirs were naturally highly pressured. In the era before secondary recovery techniques – SAGD, steam injection and horizontal drilling and multi-stage fracturing – the exploited reservoir was over-pressured, and production achieved by draining it and exploiting this pressure. Recovery from today’s low or zero pressure reservoirs- is achieved using artificial pressure injection from steam or by opening up pathways for hydrocarbons to flow up the well bore using hydraulic fracturing. These operations can be enhanced using seismic sensing and monitoring. Early examples of steam injection breakthroughs to surface have caused caprock integrity to emerge as an issue of concern and the importance of seismic analysis. Increasingly larger and higher-pressured fracking into non-contiguous reservoirs or those with faults that allow the “frac” to escape along the fault. This leads to commercial and technical failure and possible undesired seismic events.
• Thermal Recovery: Operators of existing SAGD and thermal bitumen recovery projects are increasingly using seismic to analyse how producing reservoirs are responding to ongoing thermal operations. As one seismic industry veteran commented, “No one would do anything in the steam world without seismic.” This can include the identification of “steam chambers”, steam breakthrough and other phenomena in the reservoir which can radically increase costs and reduce recovery.
• Horizontal Drilling and Multi-Stage Hydraulic Fracturing: Customers have begun to use seismic recorders to monitor and analyse hydraulic fracturing operations as they take place during horizontal drilling, fracturing and well completions. Other operators now understand the value of using seismic to analyse the characteristics within a known reservoir before high pressure, high volume fracturing, rather than just using existing information to delineate the location, top and bottom of the reservoir itself. One operator used modern seismic to analyse a reservoir before drilling. When natural faults were discovered, the client realized a high pressure, high volume fracturing treatment in that section of the reservoir would be a commercial failure before the well was drilled. In this respect, even though this was not an exploration investment in the classic sense, it was the application that put seismic on the map in the first place: invest a smaller amount of capital up front before drilling to minimize the risk of failure and maximize the return on investment. – Advancements in seismic technology have given clients a better understanding of the properties of the reservoir through which one or more horizontally drilled and multi-staged fractured wells are planned. Understanding the properties of the specific reservoir permit advanced “geosteering”, the process by which a directional drilling assembly is guided through the reservoir. In an interview in the October 1, 2018 edition of E&P Magazine, Mike Bahorich, former Chief Technology Officer for Apache Corp., stated, “Among the largest super-independents, there are some that have had tremendous success using seismic to maximize the value of their shale assets. Almost all the shale players use seismic for geosteering, and I cannot imagine geosteering without it.” In the same article, Dave Monk, director of global geophysics for Apache Corp, talked about understanding the reservoir to ensure proper spacing of wells to ensure maximum hydrocarbon recovery without having multiple reservoirs in the same reservoir communicate with each other during and after hydraulic fracturing. Monk said, “The biggest issues that people have with the completions are trying to determine how far apart the wells should be, how many fracks they should do, and how many stages should be in a lateral, and those completions engineers have not determined that yet. They don’t think they can get their information from the seismic. They understand where they’re going to geodrill…(but) the problem that they all want to solve today is how far apart to put the laterals and how many stages they should drill.”
• Evaluating Secondary Recovery Operations: Modern seismic can detect activity within a reservoir not previously available. Alberta’s Pembina Cardium formation has been producing oil since the 1950s and continues to do so today. One operator was not getting the desired results from a waterflood so a modern seismic survey was conducted on a complete township. It was then compared to a similar seismic program conducted on a township nearby not subjected to waterflooding. The operations manager and geophysicist involved in the project said, “We could actually see the impact of the waterflood. We mapped out on seismic the pressure response of the waterflood and actually confirmed the physical properties of the waterflood. While the water injection was opening some reservoir channels it was closing others.” The result was adjustments in the water injection process which increased recovery and reduced costs.
• Seismic for Prevention of Induced Seismicity from Fracking: It has been noted in several areas across North America that in certain areas of active natural geological activity hydraulic fracturing can induce greater earthquake activity. Earthquakes, a natural seismic phenomenon, occur in places where natural fractures allow sections of the earth to slip or slide thus causing ground disturbance of varying degrees. High pressure from oil and gas operations does not create the type of fault or fracture that causes tremors or earthquakes, but the introduction of lubricity agents like frac fluids or nearby seismic activity can accelerate natural geological movements. Seismic can help operators identify regional subsurface structures that could be affected by oil and gas activity.
• Seismic Cost–Effective on a Per-Acre Basis: In the same article in E&P Magazine, Richard Degner, president and CEO of Geophysical Technology Inc., explained the cost of seismic in the same economic technology that investors and oil analysts evaluate oil and gas company spending. “…for $50 to $100 an acre we can record a seismic survey that has a sampling of 4 million or 5 million traces per square mile. Twenty years ago, we were recording 20,000 or 30,000 traces per square mile. These operators are leasing land for $30,000 or $40,000 per acre, and they are drilling and completing it for another $20,000 or $30,000 per acre. If you… had 5% better execution, or even 1% better execution, isn’t that an amazing payback? The industry recorded surveys 25 years ago at 20,000 traces per square mile for around $100 per acre and is now using high technology and exceptional logistic execution to record surveys with many millions of traces per square mile for $100 per acre. At that price we’re talking about, when you’re paying $50 to $100 per acre while spending $60,000 to $80,000 per acre to lease and develop it, it always matters.”

Based on the foregoing, there is a strong case to review most of the major areas of interest in the WCSB with modern seismic technology. Of course it costs more, but it also delivers more. Much of the existing seismic data, which clients are hoping to use as a low-cost alternative to new data, is of little value. As importantly, the cost of acquiring new, high-tech seismic information remains as it has always been; a fraction of the cost of drilling and completion and an even smaller fraction of an exploitation or production investment in a reservoir that could become a huge economic or environmental failure due to caprock or natural reservoir faulting and structural challenges, discovered after abnormal pressure from surface has been applied to a reservoir that had little or no natural pressure.

Like every other aspect of Canada’s upstream oil and gas industry, seismic has been subjected to a myriad of new legislation and regulations designed to ensure enhanced stakeholder engagements and more environmentally benign operations. However, the make business more expensive and more complex.

• Seismic on Lakes – In 2007 the then Alberta Premier, Ed Stelmach declared that no seismic activity would be permitted on Marie Lake, a recreational body of water in northeast Alberta north of Cold Lake in an area well known for extensive oil development. While no specific laws or regulations for creating seismic signals within a waterbody have even been drafted in the past 11 years, the former Premier’s pronouncement continues to obstruct industry activity as operators unsuccessfully seek regulatory approval.  Meanwhile, environmentally responsible seismic acquisition on waterbodies continues apace in other jurisdictions around the globe, and new technologies are being deployed to facilitate this work.
• Riparian Areas – Alberta Exploration Regulation 2006 – 16 sets the regulations for what is called “Riparian Setback”, the minimum distance from a body of water at which seismic operations can be conducted. It is defined as, “Riparian zones are buffers to ensure minimal disturbance to vegetation and minimize the potential of flowing shot holes on public land. An aquatic buffer is an area extending a minimum of 10 metres into, or through the riparian area beginning at the water’s edge of a water body or watercourse or the bank immediately next to the water channel.” This impairs the ability of the seismic industry to obtain consistent data and can discourage clients from conducting seismic surveys in water-prone areas because of poor data coverage and higher costs. Further, the definitions are not concise. For example, “A riparian area is a variable width zone on either side of a water body or watercourse where the majority of the vegetation is aquatic”. Additionally, new technologies are now available to enable environmentally responsible acquisition with near-zero impact in riparian areas.
• Caribou/Species at Risk Protection – Industry and provincial regulators continue to have difficulty interpreting the impact of these regulations. Seismic operators have made progress in reducing line widths and are working hard to further reduce line widths and environmental impacts with new methods and technologies. This is congruent with the intent of the regulations.
• Indigenous Consultation – Consultations with indigenous communities regarding access and use of traditional and treaty lands remains an important and dynamic issue among indigenous people, industry and regulatory stakeholders.
• Safety and Training Requirements – CAGC and the seismic sector share the commitment of all stakeholders to create the safest possible work environment. The cost to prepare a new worker for the field runs in excess of $3500. The industry has been working towards standardizing an on-line Common Safety Orientation (CSO) for all new workers to the industry in all sectors. It is hoped all Operators will accept this standard in lieu of company developed equivalents.
• Labour Challenges in the Seismic Industry – The reduced activity and compressed seasonality are causing new challenges for the seismic industry. Retaining full time personnel is impossible and qualified seasonal labour is increasingly difficult to source. The continued increases and potential increases in safety training and compliance costs in the face of economic and labour challenges, combined with a reluctance by regulators and clients to acknowledge, let alone rectify the problems, further jeopardizes the financial health of this vital industry sector.

Seismic is as relevant as it has ever been, a key component of cost-effective oil and gas recovery. Because of advancements in technology, seismic has moved beyond exploration into exploitation, production, recovery and the mitigation of unintended consequences with caprock or adjacent formations. New technology has rendered old 2D and 3D seismic all but obsolete.

Relative to cost of major exploitation projects, such as a horizontal well pad, the cost of seismic is minor for the ability to achieve a higher return on investment and higher production and recovery levels, by using high density seismic to deliver incredible value. Modern seismic techniques and technology can now deliver far superior information with a much lower environmental footprint

Because of the up-front role seismic plays in the exploitation process, impediments to cost-effective seismic are obstacles to major investments, job creation, taxes and royalty income. While the politicians love to focus on the big picture problems like petroleum prices and pipelines, on the ground there are a myriad of regulatory and compliance issues that make the business less competitive that is could or should be. These also deserve a look.

It is amazing what new seismic technology can do to make Canada’s upstream business more competitive and investments more attractive. Hopefully, at some point E&P companies will quit cost-cutting their way to prosperity and return to using technology and science to make money, not just a scalpel or even a chain saw.

At the present time the Alberta government is increasingly concerned about the health and future of the upstream oil and gas industry. The door is open, more than it has been in years, for industry to advance suggestions on how the province can assist through this difficult period.

Hopefully, this will result in changes to improve industry competitiveness, not just expressions of concern.

About David Yager

David Yager is currently writing a book about climate change and Alberta’s carbon resource industries.  The book will be released in early 2019. More at www.davidyager.ca.

 

 

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