Over the last year, Veritas Exploration Services, a division of Veritas DGC, has proven the viability of a new exploration business concept that began with the construction of a high-technology seismic visualization center in Houston. The success of this venture has encouraged the company to expand the concept to three additional markets. In the following interview, Dale Bowering, President of Veritas Exploration Services, explains the industry and technology changes that opened the way to this new corporate path.
Offshore: Veritas' virtual reality center concept seems to be well received by the industry. Can you explain why Veritas decided to go in this direction?
D. Bowering: First, a point of clarification. What we have are really high-end interpretation facilities. We use advanced visualization software, but it is not a "cave" where you wear goggles, as the term virtual reality implies. At the heart of the facility is a state of the art graphics supercomputer, which delivers data to a large "powerwall." It was designed to be a facility in which data processors, geologists, geophysicists, and reservoir engineers can collaborate on exploration, development, and production problems.
These centers are all part of a larger strategy to use visualization to help do a better job of processing and analyzing data. Not only do they help us do a better job internally, but they also help us get closer to oil and gas producers, understand what they want, and communicate more effectively with them.
OS: Why did you build the first vizualization center in Houston?
DB: The primary driver of our strategy was to support our nonexclusive pre-stack depth migration (PSDM) program. The clients needed some incentive to try this new collaborative approach. In order to get companies onboard for that program, we had to demonstrate that we had the capabilities, the expertise, and the facility to do interpretation and in which to collaborate.
OS: Since most oil and gas producers have their own systems, what is their incentive to work with a lot of other producers in such a collaborative environment?
DB: We use this facility primarily to allow our specialists to interact with producers. From time to time, they will take advantage of the facility to get together with partners to work out a technical issue or help meet a tight deadline. The main thrust of our business is providing specialty data analysis. The incentive to the customer is the ability to interact with our specialists in a collaborative forum. Whether they are working on processing, AVO, inversion, petrophysics, reservoir engineering, or seismic stratigraphy projects, the visualization center provides the facilitating environment for integration of all these disciplines, skills, and software.
OS: Where do you see this business approach going?
DB: This segment of our business is driving toward characterization of the reservoir. The exploration challenge that the industry is facing today often involves chasing big fields in deepwater or harsh environments. They are often very high cost projects. In the deepwater Gulf of Mexico today, exploration wells can cost $15-50 million each, and development projects can run $1 billion and up.
Given that scenario, you must do things to reduce risk. Companies can't afford too many surprises at the drill bit. You must learn and extract the maximum information from every piece of data you have, then integrate that data into a coherent reservoir model. The facilities and skills help extract that information from the data, and are great technology resources for companies facing those challenges.
OS: Don't the larger oil and gas producers have the professional depth on staff to handle these projects?
DB: It depends on the number of projects they are working on. Even the major companies don't always have the staff or specialty skills available necessary to handle all of the projects on their plate. Some have only one-third the staff of 10 years ago and yet they are facing increasing technical challenges. They need a source of skilled people with credibility in the industry to help them get work done to their specifications.
OS: Has staff reduction in the industry been a driver in moving you toward this new model?
DB: Partly. Many of the larger oil companies responded to heavy pressure from Wall St. to improve returns by cutting overhead and research. There is less staff overall. Information technology has helped improve productivity and fast-track development, but the squeeze on overhead is still there.
On one side, there is pressure to reduce cycle time and overhead. On the other side, you have high cost projects that require development of new technology and a growing need for the application of specialty geoscience expertise. Who will fill the void? We saw this as a significant opportunity.
Oil companies need upfront effort to minimize risk. They want their deepwater projects to come on stream within five years, not 20 years. Doing that requires specialty expertise and more people, even as the companies are being forced to downsize.
OS: Does this mean that the industry is moving to a project-model business form?
DB: To some degree, it is a project model. It is much easier for us to spread the expertise among multiple clients and keep our highly skilled project team busy, versus an oil company staffing for the "peaks." Oil is still found in the minds of explorationists, but the demand for specialty skills and services to support the risk reduction is what we are targeting.
Working with the producer's exploration teams and in-house technology groups, we help plan for the technologies that will be needed over the course of a project and provide those services in collaboration with their in-house staff, quality controlled to to their satisfaction in our visualization centers. We see ourselves as a technology partner, augmenting in-house expertise.
OS: Why has Veritas made such a major business commitment to this direction?
DB: Take a look at the last 25 years in this business. The major oil companies used to have their own seismic vessels. They were spun-off into a separate industry. Oil companies used to do their own 3D processing, now even high end processing, such as depth migration, is outsourced.
Following that cycle, and building on our core expertise in geophysics, there are a host of specialty support roles that are natural outgrowths of our base business of acquiring, processing, and selling data - specifically, the process of integrating those appropriate skills to predict reservoir distribution and performance. This is going to be in great demand in the coming years.
OS: Do you anticipate a continuing stream of high-end projects because of the move into deepwater?
DB: Look at the list of discoveries due to come onstream in the Gulf of Mexico, West Africa, and Brazil. These regions all require high-end skills to find and develop oil resources. Veritas is a data provider for those areas and we get involved at all stages of the exploration and development process to reduce risk for companies. Reconnaissance work, appraisal, development, and production all require expert geoscience support in order to minimize risk.
In addition to new deepwater projects, many existing older fields need attention to stem production decline. Older fields may not have had high technology applied to them. Having an integrated team allows us to anticipate the opportunities and help companies with our skills.
OS: What about the competition from other seismic companies?
DB: Of course, we are not alone in this effort. We need to remain agile, invest in people and their knowledge - knowledge that the industry both respects and has confidence in. We have to put the right resources in our people's hands. Each seismic company is pursuing this model, each in its own way. We are pursuing it as a knowledge provider.
OS: How do you handle a client's varying software needs?
DB: We are software independent for flexibility. We have expertise in all the major software packages and have those packages available to facilitate collaboration with clients. At this point, we buy licenses for all our software and are not involved with an ASP (application software provider). ASP's are a new software model, which could help us in the future.
OS: Do you have future plans to expand?
DB: Our interest in the future of reservoir geophysics is very strong right now. As investment in new high cost, high-risk reserves increases, so will the demand for the capabilities and expertise to minimize the reservoir risks a associated with these developments. We plan on being there with the right tools and expertise to help mitigate those risks.