The Role of 3D Seismic in a World Class Turnaround*

by William K. Aylor, Jr., Amoco

Amoco has achieved a major turnaround in exploration performance in the last four years. During this period, Amoco
made major improvements in its success measures: production replacement improved from 60% in 1992 to 179% in
1996; cost of finding dropped from $8.00 in 1991 to under $1.00 in 1996; new resources found improved from 200
million BOE in 1991 to 1,000 million BOE in 1994 and 1996; and exploration drilled success rate jumped from 13% in
1991 to 44% in 1996.
This turnaround can be attributed to three elements initiated by Amoco management in the early 1990's: Portfolio Risk
Management, increased use of 3D Seismic with related technologies, and improved Acreage Management. These
three elements have caused synergies among themselves, which have enhanced and multiplied the overall effect of
the improvements. While each element was necessary, any one of these by itself was not sufficient to achieve
success.

Amoco Discovery in Trinidad

Portfolio Risk Management

In 1991 a permanent prospect quality team (PQT) of geologists
and geophysicists was created to review all exploration prospects
worldwide and to establish the size and probability of success of
each prospect. A major goal of this process is to reach consensus
between the PQT and the prospect generation team regarding the
size of the prospect and the probability of success of the
prospect. In reviews lasting 4 to 8 hours per prospect, 13 risk
components are analyzed including source rock & maturity,
migration, seal, trap definition, reservoir presence, and porosity.
The portfolio risk assessment process has been tied to the
business unit's bonus system, and bonuses are awarded based on
how well the business unit as a whole has predicted year-end
resources found. These resource additions must be within 20% of
what has been predicted or there is no pay out. The goal is to
achieve better predictability of progress, to properly apply
technical expertise and to keep teams focused on the company's
bottom line. When the overall business unit's resource predictions
are accurate, everyone is rewarded.

Another key element related to the Risk assessment process has been to focus the exploration effort only on a few
targeted countries. High priority is placed on trends and plays that have well established hydrocarbon systems,
attractive financial regimes, where Amoco has or can establish long term business partnerships, and where the
intrinsic strengths of the company can be used to provide a proprietary advantage. This ongoing effort has reduced
the number of countries where Amoco has undertaken exploration activities from 80 countries in 1991 to only
14 in 1997. The success rate of exploration wells during this period has gone from only 13% in 1991 to 44% in 1996.

Overall Success rate (1990-1996, 2D vs. 3D)

Gas well success rate (1990-1996, 2D vs. 3D)
Oil well success rate (1990-1996, 2D vs. 3D)
Wells covered by 3D (1991 vs. 1996)
Annual Drilled Success rate (1991 vs. 1996)

14% vs. 49%

24% vs. 50%
3% vs. 44%
1% vs. 65%
13% vs. 44%

200%
180%
160%
% Replacement *

3D seismic & related technologies

The major impact of 3D seismic and related technologies is
to reduce the number of dry holes and increase the overall
number of productive wells drilled. Over the 1990-1996 time
period, major improvements can be attributed to wells drilled
where 3D seismic was available prior to spud versus where
only 2D seismic was available:

140%
120%
100%
80%
60%
40%
20%
0%

1990 1991 1992 1993 1994

1995 1996

Figure 1 - Amoco replaced 60% of the hydrocarbons it

produced in 1992 and 179% in 1996.
1

($/BOE)

(MMBOE)

The Role of 3D Seismic in a World Class Turnaround

As the proportion of wells drilled
1200
$8.00
with 3D seismic has increased,
$7.00
Cost of
1000
the overall number of successes
Finding
$6.00
has increased and the overall
800
$5.00
number of dry holes has
decreased. Most of the
600
$4.00
Resources
successful wells have been
Found
$3.00
400
drilled where 3D was available
$2.00
prior to drilling. This agrees well
200
$1.00
with previous studies (see Aylor,
0
reference 1) which found that the
average Amoco exploration 3D
1991 1992 1993 1994 1995 1996
survey reliably condemns 1.4 of
Figure 2 - Exploration finding costs have dropped and resources found have
the average 3.4 previously
increased during this period.
defined prospects per survey,
and discovers 2 new, previously
unknown prospects per survey. Because these prospect additions translate into positive cash flows, it has been
estimated that each month of delay in bringing a 3D survey to management for a decision costs the company about
$1 million and the host government about $5 million. As the proportion of prospects guided by 3D has climbed, so
too has the drilled success rate. According to scout benchmark data collected by an industry group, Amoco's drilled
success rate of 44% in 1996 was in the upper quartile of the industry group, thus placing it in what we term as world
class status. Note the industry average success rate is only about 18%.
From these charts, it is evident that the use of 3D seismic has had a great impact on improved success rates. Like an
MRI for a bone surgery team, 3D seismic provides a common physical model for all the members of the team to gain a
common understanding of the problem, as well as potential solutions. This improves planning for development,
facilities sizing, production and ultimately abandonment. In addition, other high-technology tools are enhanced.
Multi-component seismic, amplitude versus offset, reservoir management, drilling and seal analysis are all improved
by 3D seismic. New technology like Amoco's Coherence Cube also helps to improve the earth model revealed by 3D
seismic.

Millions of BOE

100

Acreage Management
The third major contributor to Amoco's
exploration success is our renewed emphasis
on international acreage management. This
initiative can be characterized in a number of
ways, including our term, "Energy Solutions,"
and market building strategies. But, the
primary components of the strategy have
been to put the right kind of people on the
ground in a targeted country, to clearly
understand what our in-country customers
want and need, and to provide what is
needed. This has resulted in improved
financial regimes, aggressive market building
and successful new acreage capture.

80
60
40
20
0
Prospect Name

Figure 3 - Prospects are ranked by size, factored by risk and net

interest. Top prospects are drilled, and the BUs ability to
accurately predict resources found is the basis for individuals year
end bonuses.

Since 1992 when International "Energy

Solutions" was instituted, both our cost of
finding and resources found have improved. In 1994 a significant proportion of the billion barrels found was because
of exploration in areas newly opened by technical breakthroughs as in the deep water areas of the Gulf of Mexico or
by winning concession rights in newly privatized areas as in South America.
Seventy-five percent of the company's resource additions in 1996 resulted from market building in the early 1990's in
Trinidad's eastern gas province and the Nile Delta of Egypt. These areas had not been attractive for exploration
previously because of very poor financial returns on gas production or because of poor market conditions.

Number of Exploration Wells

The Role of 3D Seismic in a World Class Turnaround

Consulting with long time, trusted
80
partners such as Amoco, the Egyptian
government had the foresight in the
Producers
mid 1980's to establish for the first time
60
a market price for gas, effectively
making it a commodity available for
Dry holes
both local sale and export. Amoco is
40
working with the Egyptians to use gas
wherever possible in Egypt, thereby
freeing up crude for export. Uses for
Without 3D
20
natural gas include power generation,
Producers
With 3D natural gas for vehicles, etc. Amoco is
Dry holes
also working to create export markets
0
for Egypt gas in Turkey, Jordan, and
1990
1991
1992
1993
1994
1995
1996
other Eastern Mediterranean countries.
The emergence of these new markets in
Figure 4 - 3D seismic has increased the number of producers while
Egypt and the region is enabling the
helping to reduce the overall number of wells drilled by reliably
company to aggressively and very
condemning poor prospects.
successfully explore for gas in the Nile
Delta, which had previously been
unattractive for such work.
Likewise in Trinidad, working with government ministries, aggressive market building was undertaken to increase
both local Trinidadian sales and export sales. The effect of this was to make previously uneconomic gas prone areas
in Amoco held concessions financially attractive again. Primary market building activities were buying into and
expanding methanol conversion facilities for domestic consumption, aggressive gasification for industrial usage and
building LNG facilities in Trinidad for export sales.
These aggressive commercial and market building activities were built on long established governmental
relationships. They enabled Amoco to use its risk management and 3D seismic methods to successfully explore for
and book 750 million of Amoco's one billion barrels in 1996 resource additions, with a 73% exploration drilling
success rate in Egypt and Trinidad. To underscore the importance of market building it should be pointed out that
discoveries in other countries in 1996 only achieved a 30% success rate, in spite of having half of those prospects
covered by 3D seismic.
80%

% Prospects
Covered by 3D
% Exploration
Success

60%
40%

Industry
Average
Exploration
Success Rate

20%
0%
1990

World Class
Exploration
Success Rate

1991

1992

1993

1994

1995

1996

Figure 5 - As the percentage of prospects covered has risen, so too has

the drilled success rate.

Synergy
It should be noted that each of these
components of exploration success tends
to leverage the others, creating a sum that
is greater than the parts. For example, as
we've discussed earlier, we may work
aggressively with host governments to
create financial regimes and markets in
areas that previously have yielded
unattractive commodities such as gas.
This then allows for the appropriate
application of highly effective
technologies such as 3D seismic, resulting
in improved finding rates and improved
financial return for both the company and
the host foreign government.

Secondly, a country manager may be able to convince these customers that application of these technologies will
lead to earlier and more successful new field discovery and development. Amoco has good working relationships
with its partners and national oil company customers and technical skills using 3D seismic, coherency cube and 3D
AVO. Used in an aggressive but high quality manner, these skills improve its chances for acreage capture.
3

The Role of 3D Seismic in a World Class Turnaround

Finally, by employing early portfolio risk management, a country team may realize that a 3D survey, or other another
highly effective technology, needs to be carried out. Provisions can then be put into contract work programs that will
accommodate the timing and funding of this work. This will reduce the risk associated trap definition or reservoir
presence.
Acknowledgments
The author would like to acknowledge the contributions to this paper of Rusty Hinote and Steve Decatur of Amoco's
Worldwide Exploration Business Group (WEBG), as well as Elizabeth Maynard of Amoco Trinidad, for supplying
both insights and data needed for this study. I would like to also recognize the contributions of t he WEBG Prospect
Quality Team and the 3D Seismic Network of Excellence who have provided support, data and the critical thinking
needed to make a coherent story from the noise. Finally, I would like to thank Amoco management for permission
to publish this material.
References
1. The Business Impact and Value of 3-D Seismic, by W. K. Aylor, Proceedings of the Offshore Technology
Conference, 6-9 May, 1996, Volume 1, page 75, OTC 7960.
2. Post appraisal and archival: critical elements in successful exploration risk assessment, by Gary P. Citron, Peter
D. Carragher, Glenn E. McMaster, J. M. Gardemal and Don Jacobsen, Amoco, Proceedings of the Landmark
Worldwide Technology Workshop, Houston, Texas, Feb. 12 -14, 1997
About the Author
William (Bill) K. Aylor, Jr. received a BS degree in Physics from the University of Texas at El Paso in 1969. After a 4year tour in the armed services, Texaco, Inc., Terra Resources, and Amoco Corporation employed him as a
Geophysicist in Tulsa, Lubbock, Midland, Egypt and Houston. He was Amoco's Division Geophysicist
for North Africa, Consulting Geophysicist for the Permian Basin Exploration Division, Geophysics General Manager
for Amoco's Gulf of Suez Petroleum Company in Cairo, and Director of Amoco's Geophysical Systems Group in
Houston. In his current position as Coordinator of Amoco's 3D Seismic Network of Excellence, Bill leads
representatives of Amoco's Exploration and Production Business Units in discovering and sharing 3D Seismic best
practices. He is a member of the SEG, SPE an d HGS, is active in his community, and his hobbies include golf, HD
motorcycles, piano and walking.

* Editor's note:
This paper was presented at the SEG Convention in November 1997 and was published by Pennwell Publishing Co. in
the March, 1998 issue of Offshore Magazine, with permission.

Revised: 06/09/98 1:21:10 PM