An Old Fashioned Look at High Tech

This past week I wrote a little homily about the wisdom and virtue of traditional geology. It fell on deaf ears.

Obviously, a great deal has changed in the past 50 years. Gone are the typewriters and teletypes. Physicians no longer make house calls or cheerfully endorse unfiltered cigarette brands.

I miss a lot of the old ways and old icons of American industry. In the mid-70's I made a pilgrimage to Pittsburgh, to see with my own eyes the spectacle of steelmaking before it was dismantled and vanished. As a youngster I worked in Rust Belt metal bashing factories that no longer exist.

So that when I became involved in oil exploration later in life, I knew it was threatened by the same anti-industrial creed that savaged US blue collar jobs and celebrated 100% eco-friendly investment banking.

The oil patch was likewise transformed. Hundreds of thousands of rig workers and petroleum geologists were thrown out of work, no longer needed or wanted in the 80's. Universities stopped teaching dirty old oil discovery and started teaching environmental science, global warming, alternative energy and carbon sequestration.

Computers took over. This in itself was not so bad, because information technology enabled the rapid collation and analysis of opportunities. Managers got a clearer, more precise and timely picture of cost, profit, and complex enterprise puzzles like logistics and markets.

But let's not kid ourselves. Most of the petroleum systems and oil fields that we're exploring today were identified and understood 50 years ago.

It took a while to convince risk-averse managers that deepwater resources were worth the cost of exploration and floating production. Subsea systems and pipelines had to be designed and tested. Offshore seismic acquisition and 3D processing evolved slowly. But the geology was known a generation ago, especially in prolific basins like the Gulf of Mexico.

One of the high-tech solutions that bothers me most is evolving at breakneck speed, and the necks being broken are the few remaining oil geologists who have been progressively sidelined and ignored by smug reservoir engineers and seismic attribute salesmen.

For example, Ole Martinsen, the head of exploration research at Statoil, is one of the cheeriest cheerleaders for an exclusively seismic universe of petroleum mapping. "Seismic data itself can provide the same results as well data," Martinsen told an AAPG journal recently.

His Statoil colleague Marita Gading went a bit farther in declaring victory over physical exploration. "The new seismically based workflows allow us to include source rock parameters extracted from areas without well control in the modelling," she claimed. "This type of methodology lets us take a significant step in reducing exploration uncertainty in areas where there's no well data and sparse seismic data."

That's music to risk-averse managers' ears. Why bother drilling? - or hiring an oil geologist to prove a petroleum reservoir? Statoil says we can book reserves off sesimic attributes!

It's not my purpose to ridicule seismic surveys or amplitude extraction. We use it routinely to identify sand channels and structural features. But the oil industry has a horrible track record using so-called high tech solutions that bypass and allegedly supercede exploration with old-fashioned drill bits and wireline logs.

Gravity anomolies, aerial magnetic surveys, seismic "bright spots" and the collapse of traditional exploration by petroleum geologists has profoundly changed the upstream oil business.

It affects the way oil companies are funded and their presentations to investors. Finding oil is no longer as important as computer generated P3 "probable and possible contingent resources."

The technical wizards are content to write scholarly papers and make Power Point slides. Teams of engineers write spreadsheets and calculate net present value of reserves that no one has measured or tested. Billion-dollar deals and multi-million-dollar executive salaries are commonplace among loudly publicized start-ups with little or no oil production.

Whatever you can imagine or concoct is a valid play nowadays, and there's a fat, happy legion of lenders and brokers to help you sell it to amateur daytraders. Ideally, an oil deal today exists only on computers and carefully worded press releases without penetrating a reservoir.

I'd feel differently about it, perhaps, if the button-pushing mouse jockeys and AIM-listed promoters produced oil once in a while. But they can't. Reality is the enemy of digital fantasy.

Most of the majors have thrown in the towel and resigned themselves to unconventional shale, where it's impossible to miss the target formation, or tar sands that you dig up with a bulldozer instead of a drill pipe.

The independents don't care. Their downstream business is shot, pipelines sold off. Exploration is a bad bet they can't afford to fund themselves, unless they partner a NOC.

Paradoxically, the rise of state-owned national oil monopolies, however poorly managed, corrupt, and technically challenged, may be our only salvation as an industrial society. They drill and drill again, poking around in a known province with complete confidence that oil is easy to find if you spud enough wells and correlate the logs, exactly as we did a generation ago in America.

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