Looking for Oil

New technology and cheaper computers bring prospectrors new hope of turning profits.

PINK blobs surrounded by blue swirls - the rendition might appear to be nothing more than abstract art. But it's actually an image of the earth beneath 13,500 acres of South Texas ranch land, as mapped using three-dimensional seismic technology.

To Steve Gose, it's a treasure map of unprecedented precision, showing pre-

viously undetectable natural-gas fields waiting to be drilled.

``I've never seen anything that good [from geophysical data],'' he cheers. Mr. Gose is chairman of The Exploration Company, a small San Antonio natural-gas concern that holds an exploration lease on that and other nearby land totaling 50,000 acres.

That acreage is typical of the United States: It has been picked over by oil companies for six decades or longer. In the US, the most heavily drilled country in the world, most remaining undiscovered fields are small and costly to find.

Hundreds of thousands of jobs were lost in the oil industry when the price of oil collapsed in the 1980s from more than $30 a barrel to less than $10. Companies could no longer expect to recover their high exploration costs, and domestic exploration slowed dramatically. Gose lost his own $500 million fortune in the crash.

Now, by giving oil companies a way to lower their costs, 3-D seismic imaging and other relatively new technologies, such as horizontal drilling, are making it economically feasible for oil companies to explore the US again.

``Obviously, I'd like oil to be $35 a barrel,'' says William Wilbert, an independent oilman in San Antonio. ``But I'm not an idiot. I know that was a way-inflated price. To make a long story short, I can make money at $15 a barrel.'' Spot market prices rose last week to more than $19 a barrel, the highest price in more than a year.

Seismic data are acquired by sending vibrations into the ground and then recording them as they bounce back from the tops of different rock layers. A geophysicist can interpret the processed data and produce a contour map of the subsurface, showing rock formations that might contain oil or gas. He can also map seismic attributes that may indicate the presence of hydrocarbons.

In 3-D seismic studies, the data are collected on a much finer grid than ordinary 2-D seismic surveys and yield an image with far better resolution. Three-dimentional seismic imaging has been used for more than 15 years by large oil companies hunting for big discoveries in coastal waters and onshore.

The results are impressive. When Exxon Corporation examined its exploration efforts for the Gulf of Mexico between 1987 and 1992, it found that 43 percent of the wells drilled based on two-dimensional data had encountered hydrocarbons, while wells that were based on 3-D data had a 70 percent success rate.

Sharp declines in the cost of computers to compile the data from 3-D seismic surveys and the improvement in 3-D software have allowed small firms like The Exploration Company to take advantage of 3-D technology to pinpoint reserves that previously only larger companies would have had the resources to extract. Three-dimensional surveys collect far more data than 2-D surveys; the effective spacing of seismic lines may be very small - only 110 feet, rather than more than 1/4 mile in 2-D seismic studies.

Since 87 percent of oil and gas discovery wells in the US are drilled by small companies, the growing use of 3-D seismic technology means more domestic oil and gas will be found even as the number of costly, unproductive wells, or ``dry holes'' will decline, trends that industry data show are already under way.

``In the last year, there has been an absolute explosion'' of interest in 3-D seismic imaging by independent companies, says Linda Ewing, a San Antonio geophysicist who owns Frontera Exploration Consultants. Mrs. Ewing interprets 3-D seismic data, turning out finely detailed maps of the subsurface.

``Three-D is expensive, but a dry hole is much more expensive,'' she adds. ``If you save yourself from one bad [drilling] location, you've paid for four [3-D] surveys.''

Barry Brooner, president of the South Texas Geological Society in San Antonio, recalls a demonstration of 3-D seismic imaging to his members last year. The technique revealed a buried stream channel filled with sand far below the surface of the land, the kind of geologic structure that can contain natural gas.

Normal seismic studies can spot subsurface details as small as 25 feet thick, Mr. Brooner says. But this channel was only 10 feet thick.

``The audience was pretty stunned,'' he says. ``Everybody became believers at that point.''

Adds Mr. Wilbert: ``Just about everybody who's drilled a well in the last year has used 3-D.''

As valuable as 3-D seismic technology can be, it isn't always cost effective. ``If my target is never going to pay off a $500,000 3-D survey, there's no application,'' Brooner says. Adds Ewing: ``On a shallow well [costing] $60,000, you might as well just go drill the well.''

One additional advantage of 3-D seismic data is that investors like it, notes David Coover, an independent oilman in Corpus Christi, Texas. If two companies are trying to raise money for drilling, investors will buy into the deal that is based on 3-D, he has found.

The results obtained for The Exploration Company illustrate the technology's benefits. Five years ago, the company acquired exploration leases on the 33,000-acre Paloma Ranch and the 17,000-acre Kincaid Ranch in Maverick County, which borders Mexico.

Gose was interested in the Pearsall rock formation, which contains high-pressure gas underneath the entire lease. But the geological formation is broken into compartments by fractures in the rock. Poor permeability between compartments prevents a vertical well from recovering a profitable amount of gas.

His plan was to try to link multiple compartments with a horizontal well, greatly boosting the production potential relative to the cost of the well. However, the drilling fluid used in the initial well was too heavy and choked the rock pores, preventing production. The company will try again later.

Meanwhile, a geophysicist had drawn the company's attention to a seismic phenomenon related to the shallower Glen Rose rock layer. Since the 1930s, oil companies drilling into it had occasionally found gas when they penetrated ancient coral reefs. Since both the reefs and the surrounding rock are limestone, it is difficult for seismic data to indicate where the reefs are. But the geophysicist pointed out what appeared to be a signature in the seismic data that correlates with the high-porosity characteristic of reefs. A test confirmed his hunch.

Suddenly, the company could see the ancient reefs, structures which on adjacent acreage had produced 45 billion cubic feet of natural gas. However, it was still necessary to spot the highest point of the reef. Otherwise a well might penetrate at a lower point and find water, which usually lies below the gas.

In the lease acreage, the rock layers tend to tilt to the south, making the north end the likely high point of a hydrocarbon reservoir, says Robert Scott, the geologist who works with The Exploration Company on the Maverick County leases. That made it important to know the shape and extent of a potential field.

Last December and January, The Exploration Company commissioned a 3-D survey for $500,000. Ewing at Frontera Exploration Consultants interpreted the data and produced the color map, with pink representing dozens of areas of high porosity - the reefs. ``It looks like the Bahamas,'' Gose says.

When Scott saw the map, he raised his arms in triumph. ``You can see why the early people out here randomly drilling had such poor success,'' Scott says.

Notwithstanding the rattlesnakes just emerging from their winter nests, last spring The Exploration Company and a partner paid $400,000 to drill a well based on the 3-D map. They were rewarded with a potential 44 million cubic feet per day, confirming the 3-D seismic map.

``If you believe what that seismic [map] shows, we've got dozens of locations [to drill],'' Gose says. The company has already picked 35 drill sites. Now it must raise drilling money from outside investors. [See story, right.]

The income from the recent discovery well, Gose explains, will not be enough to finance additional wells as fast as he'd like to drill. To prevent reservoir damage and maximize production, the company plans to limit the well to 2 million cubic feet per day. But production so far has been limited to half that because of the small size of another company's pipeline that gathers the gas from the well. That means it will take up to 300 days of production just to recover the money spent drilling the well.

Meanwhile, Ewing has pointed out to Gose that the 3-D survey indicates another potentially gas-bearing zone that was previously unknown, lying below the Pearsall. And a shallow zone, the Georgetown, is proving productive over the entire lease.

``It's not spectacular, but it's good bread and butter. We'll probably drill several hundred of those before we're through,'' Gose says.