All at sea with EM
  from: Offshore Engineer
  by: Andrew McBarnet
  Wednesday, December 01, 2004

It is being hailed as the most significant E&P technology innovation since 3D seismic surveying took off in the late 1980s. Andrew McBarnet brings this update on the interest in offshore applications of controlled source electro-magnetic methods and on the growing business it is generating.

Awareness of CSEM for the uninitiated may have been stirred by a recent front page article in the Wall Street Journal. The main impact of the feature was to effectively 'out' ExxonMobil's cloak and dagger strategy over the best part of two years with regard to its reportedly highly successful survey operations using CSEM. At much the same time Morgan Stanley Equity Research, North America, came out with a comprehensive, proprietary overview predicting that CSEM operations could leap from a $30 million to $600-900 million business in four or five years. This would equate to 25% of current spending on offshore seismic. The Morgan Stanley report credited CSEM with contributing to ExxonMobil's remarkable run of 13 out of 13 discovery wells offshore Angola. This assertion has not appeared in subsequent, updated versions of the report, nonetheless the implications were there to be drawn: CSEM looks like a key risk management tool for future offshore E&P.

The excitement about CSEM is that it offers a way of enhancing seismic data in being able to confirm whether hydrocarbons are present in a structure, without going to the expense of drilling a well. This has become especially relevant as the industry's exploration effort has moved into deeper and deeper waters where a single well costs $50 million and upwards. Use of electromagnetic techniques for determining the nature of the subsurface is scarcely new; in the oil industry wireline logging to measure the subseafloor electrical resistivity is a routine part of exploration and reservoir development. CSEM offers a non-invasive solution, albeit at a lower vertical resolution, which under the right circumstances can distinguish between water-filled and oil/gas filled drilling targets.

The basic technique involves the deployment of a horizontal electric dipole source which transmits a low frequency electromagnetic signal to an array of seabed receivers. As the source is towed over the receiver array, recording the variations in the amplitude and phase of the received signal provides the data to determine the resistivity structure of the subsurface. The technology takes advantage of the fact that there is a significant contrast between resistive hydrocarbon saturated reservoirs and surrounding more conductive layers saturated with aqueous saline fluids.

ExxonMobil in its few public utterances on its CSEM operations refers to its proprietary Remote Reservoir Resistivity (R3M) technology. For example, in August the company announced its return to hydrocarbons exploration offshore Colombia with partners Ecopetrol and Petrobras. Tim Cejka, president of ExxonMobil Exploration, said the company was excited about bringing its global expertise and technologies, including R3M, to the project fuelling speculation that its CSEM capability was the clincher in winning the approval of Colombia's National Hydrocarbon Agency.

However, for those in the know, ExxonMobil's CSEM capability is just one piece in a complicated jigsaw of interlocking relationships. For sure, Dr Len Srnka of ExxonMobil is well known in the research world for his interest in EM, evidenced by the filing of an early patent on marine EM. But the technology actually evolved as the result of a number of mainly academic research initiatives in North America and Europe going back to the 1980s, for a long time unheralded and under-funded by industry, partly because oil companies at the time were mesmerized by the dramatic returns in exploration success afforded by investment in 3D seismic.

Any ExxonMobil claims to technology ownership have to be viewed in the light of the fact that there are three contractors in the world offering marine CSEM services, two of whom are actually working for ExxonMobil, under conditions of strict confidentiality. If there are any bragging rights for propelling CSEM methods into the commercial market, recent history suggests that the plaudits should probably go to Norway's Statoil. No wonder, then, that the shadow of numerous unresolved patent claims lingers over today's CSEM players.

Prof Steven Constable, from Scripps Institution of Oceanography (SIO), University of California San Diego, recalls that 'the early work was purely academic and it was hard to predict that it would end up being so lucrative to industry. Indeed it wasn't until exploration entered the socalled deepwater prospects that some of our methods were even applicable'.

Constable started work with Prof 'Chip' Cox at Scripps in 1983 where Cox had already carried out the first practical demonstrations in connection with the study of oceanic lithosphere and active spreading centres. From Constable's perspective the commercialization of marine electromagnetics (EM) dates back to his link with Arnold Orange, president of AOA Geophysics, a small EM company in San Diego. In 1994, Orange encouraged SIO to develop instruments for offshore exploration. The focus of their collaboration was the development of an effective magnetotelluric (MT) technique which could be used as a basic reconnaissance tool for basin characterization, or to assist in regions of poor seismic performance, such as areas of salt, basalt or carbonate lithologies. These areas generate strong reflections and reverberations making it difficult to image the underlying sediments using acoustic methods alone.

CSEM research was also on Constable's agenda. Even so, he was a little surprised in 1999 when Statoil invited him, more or less out of the blue, to peer review a marine EM survey method called seabed logging (SBL) being proposed as a direct hydrocarbon indicator. Leaders of the research team at Statoil were Terje Eidesmo and Svein Ellingsrud, now part of the management team of the Trondheimbased company emgs (Electromagnetic Geophysical Services), one of the three CSEM contractors which have been established since 2002. 'I have to give Statoil credit,' Constable says, 'for being the first company to spot the potential of CSEM and do something about it.' In his review Constable pointed out that development work on seafloor EM sounding had been going on at universities like Cambridge, Toronto and SIO for some 20 years, but opined that the Statoil project had merit and should be tested in the field.

The first full scale test of Statoil's SLB technique was carried out over a known oil field offshore Angola and involved the collaboration of a number of invited institutions. Statoil paid for the project insisting on various confidentiality conditions, the validity of which seems subsequently to have been open to different interpretations. The UK research vessel Charles Darwin was equipped with a deep towed active source instrument (DASI) from Southampton University where CSEM specialists Prof Martin Sinha and Dr Lucy MacGregor had recently moved from Cambridge University. Most of the receivers for the first live experiment came from SIO, developed by Constable and others. The processed data results from this pioneering effort confirmed that the received signals were sensitive to buried resistive layers and were written up by the team involved in the project.

In October 2001 a second SLB survey using the Polarbjorn provided by Multiwave Geophysical was conducted for Statoil and partners Shell and Enterprise Oil. This was a commercial exercise, again using source equipment from Southampton Oceanographic Centre and receivers from SIO managed by its industry partner AOA. It was following the successful conclusion of this survey that in February 2002 Statoil and the Norwegian Geotechnical Institute, which had been involved in the development of SLB, set up emgs as a separate company.

Since then egms has established a track record of SLB with some 70 projects in the North Sea, Barents Sea, offshore West Africa and the Far East working for bigger players such as Statoil, Norsk Hydro and Shell but not exlusively so. Svein Ellingsrud says: 'Smaller companies can react quickly and have found a competitive advantage using SLB.' The company uses the Multiwave Geophysical vessel Geo Angler for its surveys and has developed a relationship with Norwegian company InseisTerra for the conducting of multiclient and group surveys, notably so far in areas targeted for the Norwegian 18th offshore licensing round.

Around the time that the formation of emgs was being mooted, ExxonMobil got in on the act by commissioning its own marine EM survey offshore Angola using the Charles Darwin (with the company specialist Dr Len Srnka on board) and equipment from the folks at Scripps/AOA and the University of Southampton. The outcome of the survey certainly encouraged ExxonMobil to continue and probably provided the springboard for the creation of a competitor for emgs.

Just how high the stakes are in this market can be judged by the fact that egms was acquired from Statoil and the Norwegian Geotechnical Institute earlier this year by the global private equity company Warburg Pincus. No price was mentioned but it is believed to have been considerable, reportedly in the $100 million plus range. A first point of comparison would be the flotation in March this year of Offshore Hydrocarbons Mapping (OHM), the UK company created in 2003 to commercialise CSEM technology developed at Southampton University including the DASI source for marine EM sounding. A number of former academics are involved including Dr Lucy MacGregor as chief scientific officer. Dave Pratt, an exsenior operations man from VeritasDGC, is CEO while Pierre Jungels, former CEO of Enterprise Oil, is chairman of the company. On its listing with the London-based Alternative Investment Market, OHM was valued at £49.3 million and the company is worth a great deal more now. It was able to raise nearly £10 million in development capital, and has already encouraged investors by increasing turnover by nearly 200% to £4.7 million in its second year with a reporting profit of over £400,000.

OHM has had to be contractually silent about the fact that most of its activity and revenue to date has come from one continuing contract with ExxonMobil. The company has been supplying a crew on board the Polarbjorn to operate an upgraded version of its original source - DASI III and DASI IV - for CSEM surveys and has worked in a number of international deepwater locations particularly in West Africa and the Gulf of Mexico. On the ExxonMobil projects, OHM has been working alongside AOA Geomarine Operations (technical director, Arnold Orange), the AOA company which supplies receivers developed and built by SIO in conjunction with EMI.

Since its spin-out from Southampton University, OHM has moved to Aberdeen. It has developed its own receivers which enable the company to offer a comprehensive CSEM service to the oil industry. OHM introduced the Ocean Viking onto the market in July, a 9000t plus displacement vessel equipped with dynamic positioning well suited for the survey work involved. After projects in NW Europe, the vessel will be headed early next year to West Africa where it will be engaged on OHM's first multi-client surveys.

Pratt says that for deep water CSEM is now well beyond the proof of concept stage. 'There is a whole swathe of oil companies who view this as a tool to use if the circumstances are right.' However, he is aware that to realize the full commercial potential will need some more work. As well as supporting academic research at Scripps and Southampton, OHM is focusing on three research areas. First, it is constantly working to improve the performance of its DASI source and EFMALS receivers. Second, the company has been taking steps towards delivering images of the resistivity of the earth which clients can co-render with their existing seismic data and geological models. It has also won a number of data reprocessing contracts following its announcement earlier this year that it could image CSEM data using noninvertive techniques.

Third, the company has been trying to extend its ability to operate in shallower water environments. Currently it is frustrated by the so called 'airwave' problem in which energy trapped at the seawater/air interface overwhelms the useful information contained in signals coming from subsurface targets in areas where targets are very deep or water depths are shallow. In Norway, egms has also been applying itself to this issue and has carried out major proof of concept studies with Statoil on the Troll field and Norsk Hydro on the Grane field, results of which are said to be promising.

Pratt acknowledges that there are some outstanding competition issues, mainly emanating from Statoil's patents registered in the US, Europe and the UK. 'Our strong legal advice, supported by legal opinion sought by many of our clients, suggests that the patenting of the general method involved is invalid,' Pratt states.

However, talking to emgs, you have the impression that it stands with Statoil in wanting to defend the territory which it feels has been encroached upon. These days emgs technology is based on its own design source built by Siemens in the company's home city of Trondheim. Its receivers, derived from original designs by SIO, are still made in California by EMI, a company bought two years ago by Schlumberger.

Some eyebrows were raised at the Society of Exploration Geophysicists (SEG) annual meeting in Denver in October when it was announced that Schlumberger was also buying AOA Geomarine Operations (AGO) and would operate the company through its wireline business. Lionel Fray, president, AGO, acknowledged that the company needed research and capital to improve its equipment if it was to compete in the market. His vision of the future was very similar to the competition in wishing to offer a comprehensive CSEM service including an effective source, receiver and processing capability to meet the expected demand from the oil industry.

One immediate question raised by the Schlumberger takeover of AGO has been the status of the ExxonMobil CSEM contract involving OHM and AGO. Apparently ExxonMobil had already been talking about tendering for a complete CSEM service from one contractor. On paper AGO may not be in a good position to compete with OHM, or emgs for that matter, because in the past it was starved of the capital needed to develop a full service. That could change quickly with support from Schlumberger.

Meantime, all parties welcome the entry of a heavyweight like Schlumberger into the market as an indication of the significance of the technology. One senior executive also pointed out that it would be 'nice to have someone else bear some of the cost and effort of promoting the technology'. In fact, Schlumberger is not the only newcomer.

Last month a new company MTEM (Multi-transient electromagnetic), was launched as a spin-out from the University of Edinburgh, said to be one of the largest of its kind with initial venture capital funding of £7.4 million. The company, with an ex-Schlumberger geophysicist Leon Walker brought in as CEO, is proposing a variant of EM sounding (patent pending) which measures the flow of controlled pulses of electrical current put into the ground and then details the resistivity of the rocks and hence the nature of the fluids. The method claims to generate almost instant hydrocarbon detection results in a less complicated operation than other techniques on the market.

The brains behind the new company are Prof Anton Ziolkowski and Dr Bruce Hobbs, who have been working on EM since the early 1990s, latterly with David Wright. Ziolkowski says that the MTEM technique will seem to geophysicists more like seismic in some respects of its operation. Following further testing, MTEM intends to focus on land (unsuitable for current CSEM technology) before working its way out to sea. Where the competition is already hotting up. OE

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