Trends in Oman’s seismic services demandMarch 21, 2023
Steve Thomas, managing director of Africa Geophysical Services (AGS), talks to The Energy Year about variables affecting demand for seismic services in Oman, the company’s latest contracts and how it combines technological developments and sustainability efforts in its fleet of seismic trucks. AGS provides seismic and geophysical services.
In light of high oil prices and Oman’s current uptick in upstream activity, what is your assessment of the demand for seismic services in the country?
Seismic is not a revenue generator; it is a cost to all clients. Thus, until operators get back on their feet properly, we will not see a massive increase in demand. Now we have seen a bit of recovery from the majors, such as Oxy, CCED and PDO. But the minor players have to wait until they get some revenue back from the rise in oil prices, which have a major impact on our activities as well. As of October 2022, the average price of oil per barrel was around USD 93, and as long as it is around USD 80, it will continue to sustain upstream activities.
Then, it depends also on what operators have unprocessed in their data library. For example, we have been working with CCED since Q3 2021 so now they have one year’s worth of data which they can process. We expect them to then come to us in 2023 and decide whether to proceed with further seismic exploration or not, according to the results they got from the assessment of those data.
Can you provide us with an overview of AGS’ current position in terms of contracts and tendering plans?
We try to win contracts as much as possible in Oman, where we have a lot of seismic equipment, as well as tender for every project that comes out. At the moment, the openings we plan to get in are those from PDO, Oxy and CCED and in 2023 we expect to see tenders coming out not only for Oman but for the whole Middle East region.
Regarding our projects, we finished seismic surveys in Block 57 for Petroleb and Block 58 for Tethys, and at the moment we are in CCED’s Block4. Once our work on Block 4 is concluded, we plan to move into Block 3. The CCED job has seen the deployment of the largest nodal crew in the world, having 166,000 nodes assigned to it. For them we have in place a four-year call-off contract.
Beyond this, there are many new smaller players coming in. We have not seen them yet, but they are due to be coming in by the end of 2022 or within 2023.
What are the main challenges preventing the company from growing further?
One challenge is the duration of the contracts – the fact that our work might not be continuous, which creates uncertainty. Oil and gas is a highly capital-intensive industry and a lot of our jobs come on a short-term basis, which makes it challenging when it comes to getting the financing to get the right equipment.
We have the vibrators and the nodes, but unlike some of our competitors we don’t have camps and vehicles as all are out on existing contracts. If you rent them, it will increase the price for the client and we cannot afford to spend huge amounts of money on a three-month contract because the client will just say that it’s not worth it.
Moreover, operators sometimes shut you down if the data they are receiving from the assets are not that encouraging, and then call you when they decide to start again. For instance, as mentioned already, for CCED we have a four-year contract. It’s a call-off contract, meaning that they might continue with operations for the full amount of square kilometres that they have in their campaign plan or they may only do what they consider to be priority and call it a day if the data is not providing the desired results for them. So, out of four years, we don’t know if we will be working for two or three years.
How does AGS position itself among competitors?
Our main competitor is China’s BGP. We have the CCED full contract, while they won a three-year contract with PDO and have been awarded one with OQ as well. We also have some lease agreements in place with PDO, who rented 20,000 nodes from us.
Operators are increasingly requiring new technology and within seismic surveys one of the major shifts is that from cables to nodes. What is AGS’ position within this market trend?
Nodes are less expensive compared to cables and if you are able to cut your costs, then you have an advantage in the eyes of a client. This is one of the reasons why operators no longer want cables and it won’t take long before demand for them will disappear. To offer some numbers, to buy one node is circa USD 75 and if you want to rent, it will be about USD 0.34 per unit per day. On the other hand, cable systems are much more expensive as you have to buy the channels, which have an overall cost of around USD 2.50 per unit.
When we tender, we give operators the option of cable or node and the difference is the price. At the moment, PDO has 20,000 of our nodes on rental at present. CCED has 166,000 and we are deploying 17,000 in our operations in Tanzania.
Can you give us an example of how AGS combines technological developments and sustainability efforts?
All clients would prefer to have the latest technology in both vibrators and recording equipment and there are discussions ongoing about how to bring alternative energy sources to fuel them.
At the moment, we have 74 vibrators in our fleet, among which six are track mounted. One of their characteristics is that they don’t alter the landscape: if you fly over where our service is being done, you will only see some square marks, which over the years will fade away.
What is your standpoint on and commitment to the In-Country Value (ICV) programme?
AGS is an 80% Omani-owned company but for ICV it doesn’t really matter who owns a company – what matters is the amount of income and value you bring to the country, how many local people you employ and what you are buying in-country. Operators like CCED are demanding when it comes to being in line with ICV requirements. As part of working with them, every month we have to show that our operating costs stay within Oman – that our personnel and subcontractors are in line with our ICV values for on-field operations. Our Omanisation rate stands at around 90%.
Tell us about AGS’ international footprint and plans for future expansion.
We have offices in Muscat, the UK, Dubai, India, Tanzania, Uganda, Egypt and Turkey. We are looking to expand our operations in East Africa, where we see a lot of potential – particularly in Mozambique, Tanzania, Kenya, Uganda and Ethiopia. In Uganda, we have already been conducting some TZ [transition zone] works on Lake Albert, but then Covid put activity on standby. In Tanzania, where we have been active since 2011, we won a new project for the national oil company, Tanzania Petroleum Development Corporation (TPDC), as well as a big project for Pan African Energy Tanzania.
Although many activities in Tanzania revolve around the offshore and that isn’t within our interest, we see opportunities as there are new developments ongoing in the land sector, in both Tanzania and Mozambique.
Besides this, activity in India might rise as there is a lot of work to be done there given the government’s audits that will be conducted soon.
In three to four years, we hope to grow more, but it is not in our strategy to get too big. At the moment, we want to stay focused on the contracts we have with our operators to ensure that we meet both data quality and safety standards, whilst tendering for new ones, particularly in Oman, which is our backyard.