April 28, 2010
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Home / Issue Archive / 2010 / April #4 / Geological Exploration Experts Sense Optimism in Market for 2011

№ 4 (April 2010)

Geological Exploration Experts Sense Optimism in Market for 2011

   The positive dynamics of Russian geological exploration expected by the representatives of companies whose businesses are closely linked to the development of new technologies and services provided in the field is supported by 5-10 percent budget increases assigned by producer companies for geological exploration in 2010.

By Elena Zhuk

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   Players on the geological exploration market predict the market will regain 2008 volumes in two years’ time and see a boost in 3D seismic acquisition

   “The market will recover as soon as next year and probably surpass pre-crisis figures of 2008,” says Georgy Gogonenkov, first deputy general director at the Central Geophysical Expedition (CGE). His opinion is shared by colleagues at ION and the Integra Group of Companies who forecast recovery of previous volumes around the end of 2011.

Greater in Number and Cheaper in Price

   “Compared to 2009, today’s market is evidently more active; however oil and service companies are demonstrating certain reservations regarding investments in geological exploration. It is worth noting that though the cost of services has fallen, the difference is now balanced by the growing scope of work,” ION Regional Vice President for Russia and the CIS Jean Januard pointed out.

   “Geophysical services are in demand in 2010, since the scope of exploratory and operating well drilling has grown,” says Gazpromneft Nefteservis general director Valery Kolotilin. At the same time, he highlights the decrease in the cost of services forced by competition. “A key factor for our clients is now good value for money. We should be realistic in evaluating our opportunities in this respect and make investments in geophysics to meet client demands in the future,” says Kolotilin. He says the company has already been rewarded for the efforts it has made. “A contractor who masters the latest technologies attracts more long-term contracts and these in turn facilitate long-term business planning,” he says.

Making Up Lost Ground

   Actually all the experts interviewed by OGE unanimously agree that the market is gradually reviving. “Now we can talk about a progressive increase in the winter scope of work, about slight cost increases and new projects launched, for instance in the North Yamal, Uvat and generally in West Siberia,” Integra Executive Vice President for Geophysics Chris Einchcomb said, expressing his optimism about the future. “LUKOIL is ready to restore 2007–2008 scope of geological exploration right now. But where can we do it? Russia’s Subsoil Law does not encourage private companies to prospect on the shelf and fields related to the category of strategic or federal,” a LUKOIL spokesman told OGE.

   “Last year expenses for geological exploration were cut 45 percent compared to 2008. The government has issued no licenses for large and medium fields for the last two years… Given this, LUKOIL is building up its foreign prospecting and developing assets,” he adds. Besides the Komi Province and Yamal-Nenets Autonomous District, LUKOIL’s regional priorities in terms of geological exploration include the Caspian Sea, the Gulf of Guinea, Iraq, Uzbekistan and the West Aral Sea.

Crisis Contributes to Seismic Acquisition Development

   Gogonenkov believes the crisis may change the ratio between seismic acquisition and drilling. “Since drilling is far more expensive than seismic acquisition (seismic accounts for no more than 10 percent of the total scope of geological exploration), we can expect that prudent companies will increase the percentage of seismic acquisition in comparison with the well drilling. Wells will be drilled based on numerous, primarily 3D prior seismic operations.”

   “The effective exploration of new and follow-up exploration of producing fields is impossible without seismic acquisition using the latest technologies,” TNK-BP says. This year the company plans to spend $400 million on geological exploration – three times as much as its 2009 investments in the sector.  $180 million of this amount will be assigned for seismic acquisition financing. Besides the Orenburg region and the Khanty-Mansiysk Autonomous District  (Samotlor and Em-Yogovskoye fields), which are traditional operating areas for TNK-BP, the company plans to explore new regions in the north and south of West Siberia (the Uvat Project in Tumen region, fields in the north of Krasnoyarsk territory and in the Yamal-Nenets Autonomous District), fields in the north of the European part of Russia (in Timan-Pechora province and Komi Province) and in the Astrakhan and Saratov regions.

3D Prospects Are More Promising

   TNK-BP will mark 2010 by further increasing investments in 3D seismic acquisitions, which will account for 80 percent of the budgeted $180 million, while the remaining 20 percent will be used to finance 2D seismic acquisitions.

   While the company plans to stick close to pre-crisis 2008 scope of 2D work (6,000 linear kilometers), in 3D TNK-BP is scheduling an increase of over 50 percent on 2008 figures (6,500 square kilometers). Rosneft also intends to boost its activities in 3D seismic, increasing the scope of its work by 50 percent. The trend is similar at LUKOIL. In 2009, LUKOIL covered 2,445.9 linear kilometers (40 percent of the 2008 performance) in 2D seismic acquisition, and 4,547.65 square kilometers (153 percent of 2008) in 3D work.

   Although the popularity of 3D seismic acquisition is evidently growing, service sector representatives assert continuing parity of demand for both methods. “Orders for 3D seismic acquisitions are apparently growing in number, however at the moment we have to say the ratio is about 50/50,” says Einchcomb. Januard supports his opinion, emphasizing similar tendency in the use of the two programs.

   3D is also being used in one of TNK-BP’s most promising seismic acquisition projects – further acquisitions are schedules in the Alisovsky and Kichkassky fields in Orenburg Region, where one of the high productivity vibroseis acquisition methods (HPVA) was first applied for dense high resolution acquisition. This method is used to obtain high quality and high resolution images across an entire range of selected depths (including shallow deposits in Perm).   

Expectations for 2010

  In evaluating the demand for technologies and services, developers specifically highlight the data processing sector. “The focus in this sector is shifting more and more towards sophisticated inverse seismogram procedures, simulation of reservoir response parameters, which is similar to the stochastic well-based inversion through forward modeling.  These technologies are extremely efficient and are in great demand,” Gogonenkov points out.  

   “In 2010 demand will be focused on services like seismic data processing and interpretation, including reprocessing; ION ARIES II seismic station services, AHV-IV and AHV-IV TRT vibration sources, Pelton synchronization systems and VectorSeis digital three component sensor,” says Januard.

   Among other things, the Central Geophysical Expedition points to growing interest on the Russian market for multi-component products. “These are foremost products designed for reservoir-scale fracture modeling”, says Gogonenkov, “In my opinion, stochastic inversion will shortly become one of the most attractive products and I expect a growing interest towards azimuthal seismic observations and Qsistem observations, which Western Geophysical is introducing recently quite widely. This method supposes that a company may avoid on-site mixing and focus on discharging a great number of single receivers and single shots, performing all mixing procedures intellectually, as part of data processing.”

   “We have noticed a growing interest on the part of subsoil developers in the newest technologies that enable intensification of geological surveys with significant improvement of their speed and results,” Aleksander Dementyev, the head of the Petroleum Geo-Services (PGS) rep office in Moscow says (PGS provides services in marine seismic surveys). “For example, using the unique  marine technology GeoStreamer with two data transmitters makes it possible to radically increase the depth and quality of images even in the most difficult weather conditions. We hope that this innovative technology will begin to be used in Russia.”

Technology Advances at Service Companies

   Service companies are making their own technology forecasts. “Companies are currently focusing on developing vibration projects in Yamal. There are many questions about wind noise and finding solutions to this issue; summer season operations are now of greater interest – and this is also true for regions where all operations were traditionally performed exclusively in the winter,” says Einchcomb. Einchcomb’s exploration is focused in West Siberia, including north of the Yamal peninsula; further operations will cover the territory in the CIS, Uzbekistan and Turkmenistan.

   Gazprom Neft, whose exploration is conducted by the Gazprom Neft Noyabrskneftgazgeophysika business unit, points out to the growing demand for geophysical well logging, which uses the latest technologies designed to reduce the costs of producer companies and drilling time. Last year the company expanded its range of services.

   “Geophysicists have introduced a new service – supervising operating well drilling and sidetracking, which does not require any restructuring of production facilities and is in great demand in the market,” says Kolotilin. The focus on developing the technological component is understandable: one of the key objectives is to increase external order acquisitions (from 15 percent to 30 percent in 2012) and gaining entry to the new regions. “The company’s external orders last year involved geophysical services in East Siberia – in Vankor through Rosneft and in Yakutia in Chayandinskoye field through Gazprom Neft Shelf. This year, the number of regions has increased – TNK-BP provides services through Samotlorneftegaz and Samara Nafta in the Volga region. Geophysical exploration services are provided for Gazprom Dobycha Noyabrsk,” explains Kolotilin.
Market revival is also evident in the number of tenders coming into play. All companies interviewed by OGE noted bids in which they expect high chances of winning.

Great Expectations

   All market players expect the scope of off-shore geophysical exploration to grow and the only difference in their forecasts is the time this will happen. “This section will undoubtedly experience growth in the next few years. It is my opinion that as soon as 2010, 2011, 2012, the growth in seismic services on the shelf, including the north and Far East shelf in Russia, will be measured in double-digit percentages and not just in single digits,” says Gogonenkov. He asserted that offshore is exactly where 4D seismic acquisition has good chances to develop. “Time-lapse survey is less efficient if applied on land. Here we will be able to detect gas volume variations, which is valuable for underground gas storage maintenance, but, in my opinion, it will be difficult to see changes in the volume of oil, given the high noise level typical for all on-land operations,” adds Gogonenkov.  

   Januard avoids the risk of any time-related forecasts, which he explains by “long years of expectations for the growth of shelf explorations”.  For this sector, the company offers marine survey systems (Intelligent Acquisition) and innovative technologies for marine seismic in the Arctic ice.

   “Of course, there is a growing interest in offshore, but given the difficulties of marine seismic acquisition, it is too early to say anything about short-term forecasts; all operations are currently focused on the transit zone of the Caspian Sea,” says Einchcomb.

   Alexander Dementyev has big expectations for co-operating with PGS Khazar which is conducting seismic surveys on the Caspian shelf. Implementing a long-term strategy to raise competition and focus on work safety and quality is bringing results – the company’s turnover has grown since its inception. This year, the company began carrying out a modernization program and enlarging its specialized fleet – the first vessels are already being built at Astrakhan.
Yet, Dementyev points out to a number of factors hindering accelerated development of this sector. One of them is the monopolies enjoyed by Gazprom and Rosneft for geological exploration of the shelf, the fact it is practically impossible to obtain geophysical exploration license, and the absence of multi-client business models and an effective geo-information market, and finally, the technological backwardness of the Russian geophysical sector. However, recent proposals from the Russian Natural Resources Ministry for amending the Subsoil Law provide hope that seismic surveys on the shelf will be stepped up beginning in 2011-2012. To improve the situation, Dementyev proposes creating appropriate conditions for fair international competition and partnership, approving shelf licensing programs as soon as possible, offering tax breaks for technological developments in geological explorations and a number of other steps. “We should consider introducing insurance of environmental risks for geological exploration. The amount of an insurance premium should be related to the technologies used,” he proposes.

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