Rune Eng, president and CEO, provides the answers to why Spectrum is emerging as a key player in the market for multiclient marine seismic surveys and where the company is heading with its business.
OE: Spectrum has been around for a long time. Can you summarize the company’s history up to now.
Rune Eng:Spectrum was founded back in 1986 as a seismic processing company. As such, it developed a strong reputation for highquality processing of challenging data. The main development in the last three or four years has been entry onto the Oslo stock exchange at which time the owners decided to transform the business model from an assetoriented into a projectoriented business. This led the company to move toward multiclient seismic services.
In 2011 we took the next step in the development of the company by acquiring CGG Veritas’s global multiclient 2D library. This has given Spectrum the critical mass where we can use this data to grow the company and fund new projects.
How has the company strategy changed since you joined the company?
Spectrum has moved very rapidly from a specialized seismic processing house into a pureplay multiclient services company with a global library of modern seismic data.
Our focus is now on providing seismic products specifically designed to enhance hydrocarbon exploration within a particular region. We now employ a team of geoscientists who use geological knowledge combined with any available seismic or remote sensing data to evaluate the hydrocarbon potential of offshore basins around the world.
This information helps us to select prospective regions where our multiclient projects can target plays key to the industry, or identify new, unrecognized potential-plays.
Our seismic expertise then enables us to solve the imaging challenges and allow our clients to make better exploration decisions with the data they purchase.
What is the value of multiclient seismic surveys to oil companies, and how do they differ from exclusive surveys?
Just 10 years ago it was important for oil companies to own their seismic data. They were using seismic as a competitive advantage and ring fencing any proprietary information.
Over the years the culture has changed significantly. We now see a greater level of transparency and oil companies now prefer to compete on the interpretation of data rather than on the data itself. Owning data is expensive and going back 20 years oil companies used to have their own inhouse seismic departments and assets.
Operations within oil companies are being increasingly streamlined to allow them to concentrate on their core subsurface assets, rather than supporting businesses such as seismic.
As a result of these changes, 2012 has been a peak year in seismic. Global multiclient investment will exceed US$2 billion. This figure accounts for the revenues from various different multiclient seismic providers such as WesternGeco, TGS, CGG, PGS, Spectrum and, to some extent, Dolphin Geophysical. This growth is thanks to the changes within the structure of oil companies which resulted in the multiclient model becoming more widespread and accepted.
Rumour has it that you are developing an expanded model for multiclient surveys. What does that look like?
My vision for the company is that when a client enters our interactive data room with a global map of seismic data they will ask for information on a region and we will call in our relevant expert who will have an encyclopedic knowledge of that region. We aim to astound the client with our indepth analysis of seismic data, play types, and local licensing knowledge of basins from around the world.
I see the seismic value chain as starting with airborne gravity magnetics, moving to 2D lines, infilling those lines, then 3D seismic, and we want to be at the end of this value chain. At all stages we can add value by integrating remote sensing exploration technologies to improve the quality and bandwidth of imaging for the client. If there was a hybrid company that sits between seismic companies and oil companies, that is Spectrum and we are getting there.
Inevitably people will compare you with TGS which has been extremely successful specializing in multiclient. Are you following the same business model?
Spectrum have been likened to a miniTGS by some industry analysts. That is not something we would argue against. Investors have seen the success of TGS and appreciate the assetlight nature of the business model. For example, we are using technology to the extent that we want to enhance our multiclient data, though we have no major R&D spending.
However, our vision is to differentiate ourselves in the 2D market so that we are delivering companies with prospects rather than data. We have to be able to give them the results of previous wells and tell them why they were dry. We have to think like an oil company and develop exploration play understanding that focuses our riskreduction workflows. To develop our own exploration plays, we are employing former exploration managers from oil companies who are the ‘storytellers’ in our company and they bring credibility to the logic and passion of the understanding through the specific experience they have gained.
Without giving away any secrets, where do you see as the most prospective areas of the world for future exploration? Can we expect any surprises like offshore East Africa and the eastern Mediterranean?
Brazil’s Northern Margins is an area where we predict big discoveries in a little explored region and further south in the Atlantic. Namibia’s Orange River basin has huge potential soon to be tested by the exploration drill bit. Yet we also consider the more mature basins offshore Norway and the UK to have potential for new paradigm-changing plays to be sought and explored, requiring Spectrum’s high quality seismic with an integrated technologies approach to unlock the remaining potential.
Spectrum was the first company to carry out surveys in the eastern Mediterranean many years ago. Why has it taken so long for the industry to wake up to the potential, and is the company’s legacy data still relevant?
Due to the nature of our multi-client products we must always stay one step ahead, thinking and acting very much like an oil company in the early phase of exploration.
Spectrum has been going to areas like the Mediterranean, South America, and the North Sea to find areas which will eventually become interesting oil provinces. If you had asked anyone five years ago whether Lebanon or Israel would be hot spots for exploration, people would probably have laughed at you. Today this is truly a major E&P region thanks to Noble’s gas discoveries in the Levantine basin which are estimated to contain more than 30 TCF of gas. Spectrum was in Lebanon in 2002 back when people were asking us why we were there.
Only when Noble began making significant gas discoveries offshore Israel did the industry really begin to take notice of the eastern Mediterranean.
Even now, we believe that the region is underexplored. Our geoscientists postulate on the possibility that this area may yet produce significant oil discoveries too.
Our head start in the eastern Mediterranean means that we already have some of the best 2D multi-client seismic coverage in the region. This data is now being superseded by our 3D surveys shot toward the end of last year. However, with so many oil companies coming into exploration offshore Lebanon very late in the game, our 2D seismic is now providing an efficient and economical way for those companies to quickly get up to speed. We combine our 2D seismic data along with speciallycommissioned well reports, geological analysis reports, and geopolitical information into a Lebanon exploration starter pack – a focused product supplying everything our clients need to begin their successful exploration evaluation of the region.
Can we expect Spectrum to develop in any new directions in the future in order to grow?
Our aim is to investigate new ways in which we can enhance the exploration potential of the basins in which we work. Often this is through acquisition of new seismic surveys to generate enhanced imaging or achieve more comprehensive data coverage. However, we are now discovering the benefits of integrating different geophysical disciplines with our seismic data. We have seen EM and gravity gradiometry data provide uplift in the seismic processing of our data in some regions.
If vessel availability becomes an issue in the next year or two, is that a problem for a multi-client survey based company?
There are many suppliers of seismic vessels that we can turn to acquire our datasets, and this is not likely to become an issue for Spectrum. Selected, long-term cooperation agreements and involvement in excellent joint venture projects with vessel operators is proving its worth, and attractive to both vessel operators and Spectrum.
A short term shortage in peak season of vessel capacity may delay the start-up of a multi-client project, but in most cases we can plan for the long term with flexibility in delivery of the project.
What next for Spectrum?
Spectrum aims to be number one in providing 2D multi-client seismic data. We have projects from Asia Pacific, to Africa, Brazil, and the Mediterranean.
Spectrum will also continue moving into the 3D market. We have already acquired our first multi-client 3D and we will acquire more 3D data in 2013.
Last year is not going to be a record year for very long, 2013 will be better. We have good visibility on projects and on the people who work for us.
Our industry is based on skilled people and although our new organizational structure will be fully tested over the coming months, we now have dedicated people to take care of various regions from Africa to Asia Pacific and this will have a major impact on the growth of the business. We are working toward becoming that hybrid company sitting between seismic companies and oil companies.
I want our customers and the industry to look on us not as a seismic company, but one which sells prospects to oil companies, integrating technologies to inform the oil companies on where they should explore next. OE