As introduced in a previous Seismic Tech-Notes article on Separated Wavefield Imaging [‘SWIM’], SWIM uses both the up-going pressure wavefield (‘P-UP’) and down-going pressure wavefield (‘P-DWN’) from the dual-sensor wavefield separation of GeoStreamer 3D data to fundamentally change the way that seismic migration can image the subsurface, the first 1 km or so below the surface in particular. Broadband and continuous seismic images all the way up to, and including, the seafloor seismic event—even in areas with very shallow water and where the 3D seismic surveys have towed a very large streamer spread to optimise survey efficiency. Every receiver from every streamer becomes a ‘virtual source’, thereby greatly extending the spatial extent of the migrated images, most famously mitigating the cross-line acquisition footprint associated with all 3D streamer surveys, notably those in shallow water, using large streamer spreads and with shallow targets of interest. A common vernacular has also been to describe SWIM as imaging ‘All orders of surface multiples’, which it does, but a better description is that ‘The complete seismic wavefield is being imaged’.
I discuss the power of SWIM to contribute to shallow velocity model building, imaging and interpretation below, building a platform to discuss seismic inversion and quantitative interpretation (QI) in a future article.
Shallow Velocity Model Building
Figure 1 compares shallow image gathers imaged from GeoStreamer data with Kirchhoff PSDM versus SWIM. Anyone familiar with seismic processing will understand that the fold on shallow arrival times/depths is always very small because of the combination of the 3D multi-streamer acquisition geometry and the outer trace mute applied in processing. In the worst case at the outer streamer locations for wide-tow geometry and/or shallow water areas there will in fact be zero fold for shallow depths and a very strong acquisition footprint will corrupt the shallow seismic data. The upper part of Figure 1 displays this well-known lack of shallow fold using Kirchhoff pre-stack depth migration (PSDM). Almost unbelievably, the lower part of Figure 1 illustrates how the introduction of P-DWN into a modified form of depth migration (SWIM) enables all offsets for all depths to contribute useful information using the same (GeoStreamer) survey data.
Whilst the events in the upper part of Figure 1 appear to be ‘flat’ and would satisfy a seismic processing expert picking velocities, anyone can see that it is very challenging trying to assess the ‘flatness’ of such short seismic events. In contrast, every event in the lower part of Figure 1 enables a very accurate assessment of the offset-dependent quality of the velocity model at all two-way time (TWT) or depth. Indeed, it is apparent in the SWIM gathers that the velocity model used is in fact slightly inaccurate at the far offsets (‘undercorrected’), and more sophisticated high-order/multi-offset/anisotropic velocity corrections can be applied, tested and refined with confidence. The use of SWIM in ‘Complete Wavefield Imaging’ (CWI) velocity model building has now become commonplace.
It is worth reminding ourselves that the ‘structural stability’ of depth imaging is rather useless without very accurate shallow velocity control. The 3D spatial integrity of the structures imaged, the juxtaposition of events across faults, the pull-up/push-down influence of near-surface velocity heterogeneities upon seismic-to-well ties, the ability to accurately quantify the volumes of prospects, and so on, all depend upon the seismic depth range where we historically have the worst understanding—the first 1 km below the surface.
Near Angle Illumination
It is worth noting that all SWIM events are naturally zero phase at all depths, and the angle coverage/illumination is substantially improved by comparison to conventional image gathers—particularly in terms of near-angle coverage. These considerations contribute to the spatial resolution of shallow features associated with SWIM depth slices. Whilst minimum angles in excess of 25° are routinely observed in the first 0.5 seconds on conventional angle gathers in shallow water depths (less than 300 m), the minimum angles observed on SWIM angle gathers are routinely less than 5°. This becomes particularly relevant for seismic inversion and AVO studies. We also observe in the lower part of Figure 1 that stable far angle information is available past 42° in this particular example—both because the velocity model used to convert offset to angle can be more accurate and because significantly larger offsets are imaged.
Velocity model building in complex geological regimes is increasingly moving towards using angle domain common image gathers (ADCIGs) as the preferred platform rather than traditional offset domain gathers. The challenges observed in Figure 2 are therefore also relevant to shallow velocity model building in addition to seismic inversion where small minimum incidence angles are critical to derive accurate AVO incidence and gradient information—the application for angle stacks discussed in a future article. As we will see, SWIM image gathers have densely sampled angle information for all angles of interest and all depths of interest.
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Headline crude prices for the week beginning 20 May 2019 – Brent: US$73/b; WTI: US$63/b
Headlines of the week
Midstream & Downstream
At first, it seemed like a done deal. Chevron made a US$33 billion offer to take over US-based upstream independent Anadarko Petroleum. It was a 39% premium to Anadarko’s last traded price at the time and would have been the largest industry deal since Shell’s US$61 billion takeover of the BG Group in 2015. The deal would have given Chevron significant and synergistic acreage in the Permian Basin along with new potential in US midstream, as well as Anadarko’s high potential projects in Africa. Then Occidental Petroleum swooped in at the eleventh hour, making the delicious new bid and pulling the carpet out from under Chevron.
We can thank Warren Buffet for this. Occidental Petroleum, or Oxy, had previously made several quiet approaches to purchase Anadarko. These were rebuffed in favour of Chevron’s. Then Oxy’s CEO Vicki Hollub took the company jet to meet with Buffet. Playing to his reported desire to buy into shale, Hollub returned with a US$10 billion cash infusion from Buffet’s Berkshire Hathaway – which was contingent on Oxy’s successful purchase of Anadarko. Hollub also secured a US$8.8 billion commitment from France’s Total to sell off Anadarko’s African assets. With these aces, she then re-approached Anadarko with a new deal – for US$38 billion.
This could have sparked off a price war. After all, the Chevron-Anadarko deal made a lot of sense – securing premium spots in the prolific Permian, creating a 120 sq.km corridor in the sweet spot of the shale basin, the Delaware. But the risk-adverse appetite of Chevron’s CEO Michael Wirth returned, and Chevron declined to increase its offer. By bowing out of the bid, Wirth said ‘Cost and capital discipline always matters…. winning in any environment doesn’t mean winning at any cost… for the sake for doing a deal.” Chevron walks away with a termination fee of US$1 billion and the scuppered dreams of matching ExxonMobil in size.
And so Oxy was victorious, capping off a two-year pursuit by Hollub for Anadarko – which only went public after the Chevron bid. This new ‘global energy leader’ has a combined 1.3 mmb/d boe production, but instead of leveraging Anadarko’s more international spread of operations, Oxy is looking for a future that is significantly more domestic.
The Oxy-Anadarko marriage will make Occidental the undisputed top producer in the Permian Basin, the hottest of all current oil and gas hotspots. Oxy was once a more international player, under former CEO Armand Hammer, who took Occidental to Libya, Peru, Venezuela, Bolivia, the Congo and other developing markets. A downturn in the 1990s led to a refocusing of operations on the US, with Oxy being one of the first companies to research extracting shale oil. And so, as the deal was done, Anadarko’s promising projects in Africa – Area 1 and the Mozambique LNG project, as well as interest in Ghana, Algeria and South Africa – go to Total, which has plenty of synergies to exploit. The retreat back to the US makes sense; Anadarko’s 600,000 acres in the Permian are reportedly the most ‘potentially profitable’ and it also has a major presence in Gulf of Mexico deepwater. Occidental has already identified 10,000 drilling locations in Anadarko areas that are near existing Oxy operations.
While Chevron licks its wounds, it can comfort itself with the fact that it is still the largest current supermajor presence in the Permian, with output there surging 70% in 2018 y-o-y. There could be other targets for acquisitions – Pioneer Natural Resources, Concho Resources or Diamondback Energy – but Chevron’s hunger for takeover seems to have diminished. And with it, the promises of an M&A bonanza in the Permian over 2019.
The Occidental-Anadarko deal:
Source: U.S. Energy Information Administration, Short-Term Energy Outlook
In April 2019, Venezuela's crude oil production averaged 830,000 barrels per day (b/d), down from 1.2 million b/d at the beginning of the year, according to EIA’s May 2019 Short-Term Energy Outlook. This average is the lowest level since January 2003, when a nationwide strike and civil unrest largely brought the operations of Venezuela's state oil company, Petróleos de Venezuela, S.A. (PdVSA), to a halt. Widespread power outages, mismanagement of the country's oil industry, and U.S. sanctions directed at Venezuela's energy sector and PdVSA have all contributed to the recent declines.
Source: U.S. Energy Information Administration, based on Baker Hughes
Venezuela’s oil production has decreased significantly over the last three years. Production declines accelerated in 2018, decreasing by an average of 33,000 b/d each month in 2018, and the rate of decline increased to an average of over 135,000 b/d per month in the first quarter of 2019. The number of active oil rigs—an indicator of future oil production—also fell from nearly 70 rigs in the first quarter of 2016 to 24 rigs in the first quarter of 2019. The declines in Venezuelan crude oil production will have limited effects on the United States, as U.S. imports of Venezuelan crude oil have decreased over the last several years. EIA estimates that U.S. crude oil imports from Venezuela in 2018 averaged 505,000 b/d and were the lowest since 1989.
EIA expects Venezuela's crude oil production to continue decreasing in 2019, and declines may accelerate as sanctions-related deadlines pass. These deadlines include provisions that third-party entities using the U.S. financial system stop transactions with PdVSA by April 28 and that U.S. companies, including oil service companies, involved in the oil sector must cease operations in Venezuela by July 27. Venezuela's chronic shortage of workers across the industry and the departure of U.S. oilfield service companies, among other factors, will contribute to a further decrease in production.
Additionally, U.S. sanctions, as outlined in the January 25, 2019 Executive Order 13857, immediately banned U.S. exports of petroleum products—including unfinished oils that are blended with Venezuela's heavy crude oil for processing—to Venezuela. The Executive Order also required payments for PdVSA-owned petroleum and petroleum products to be placed into an escrow account inaccessible by the company. Preliminary weekly estimates indicate a significant decline in U.S. crude oil imports from Venezuela in February and March, as without direct access to cash payments, PdVSA had little reason to export crude oil to the United States.
India, China, and some European countries continued to receive Venezuela's crude oil, according to data published by ClipperData Inc. Venezuela is likely keeping some crude oil cargoes intended for exports in floating storageuntil it finds buyers for the cargoes.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook, and Clipper Data Inc.
A series of ongoing nationwide power outages in Venezuela that began on March 7 cut electricity to the country's oil-producing areas, likely damaging the reservoirs and associated infrastructure. In the Orinoco Oil Belt area, Venezuela produces extra-heavy crude oil that requires dilution with condensate or other light oils before the oil is sent by pipeline to domestic refineries or export terminals. Venezuela’s upgraders, complex processing units that upgrade the extra-heavy crude oil to help facilitate transport, were shut down in March during the power outages.
If Venezuelan crude or upgraded oil cannot flow as a result of a lack of power to the pumping infrastructure, heavier molecules sink and form a tar-like layer in the pipelines that can hinder the flow from resuming even after the power outages are resolved. However, according to tanker tracking data, Venezuela's main export terminal at Puerto José was apparently able to load crude oil onto vessels between power outages, possibly indicating that the loaded crude oil was taken from onshore storage. For this reason, EIA estimates that Venezuela's production fell at a faster rate than its exports.
EIA forecasts that Venezuela's crude oil production will continue to fall through at least the end of 2020, reflecting further declines in crude oil production capacity. Although EIA does not publish forecasts for individual OPEC countries, it does publish total OPEC crude oil and other liquids production. Further disruptions to Venezuela's production beyond what EIA currently assumes would change this forecast.