The seismic survey fleet has endured several years of very challenged market conditions, with oil company exploration spending having been subject to deep cuts during the offshore downturn. In recent months though, a few potentially positive signs have contributed to seismic survey vessel market sentiment perking up slightly. What then are the key things to keep in mind for seismic survey demand 2018?

Rough Patch

The seismic survey fleet consists of 151 vessels that can be utilised in conducting seismic surveys, which are used to image geological structures and (potential) hydrocarbon deposits beneath the seabed. In essence, images are produced by reflecting sound waves off subsurface rocks and measuring the time echoes take to return to the ‘streamers’ towed by seismic vessels. Older vessels tend to be geared towards 2D surveys, which use only one streamer. More nuanced, 3D surveys are conducted by vessels equipped with multiple streamers (around 60% of the fleet). Repeated 3D shoots can also be carried out as part of ‘4D’ reservoir monitoring at producing fields.

During the offshore downturn, deep cuts to oil company exploration spending have resulted in a drastic drop in demand for seismic work, putting some survey vessel owners under severe financial pressure (hence in part why upwards of 40% of the fleet is idle or in lay-up). The fight by remaining players to adapt to the tougher market conditions has helped to accelerate the sector’s shift from single-client to multi-client work. In multi-client studies, vessel owners tend to initiate surveys, bearing all the risks themselves, and then aim to sell the data to multiple oil companies, often for offshore licensing rounds.

Positive Readings?

As well as a slight uptick in rig utilisation in recent months, other signs that can be associated with offshore exploration are perhaps encouraging for potential seismic survey demand too. For example, as of start December 2017, a total of 464 offshore blocks with a combined area of over 376,00 km2 have been awarded in the year to date, up by 4.6% in numerical terms and 26% in area terms on an annualised basis from the nadir of 2016. Many of these blocks have been awarded in relatively under-explored frontier areas such as Suriname, Namibia, Cyprus, the deepwater Mexican GoM and the Barents Sea. Hence ExxonMobil for example, has announced plans to acquire 3D seismic data at its new Brazilian blocks in 2018. Indeed, offshore seismic survey companies have been reporting higher levels of tendering and pre-licensing requirement in 2017 versus 2016. Given current consensus views for higher oil prices next year, this trend could be expected to continue in 2018.

Mixed Picture

However, licensing activity in 2017 is still set to be well below the boom years (953 blocks totalling 1.2m km2 in 2013, for instance). And a backlog of 714 ‘probable’ field developments, including where FIDs have been delayed since 2014, could dampen the need for oil companies to replenish reserves just yet: arguably, the links between blocks and survey work is not as strong as might be thought. In summary, potential demand for seismic seems to have fallen far in a tough few years. But there are now signs that could warrant a degree of optimism, however limited. Perhaps paying close attention will reveal a clearer picture in 2018.
Source: Clarkson