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Interview

with Steve Hearn, Managing Director & Chief Geophysicist, Velseis

05.05.2011 / Energyboardroom

Velseis has been active for over 25 years. I imagine a lot of changes have happened in the company during this time. How would you describe the company today to our readers?

At the core of Velseis is a group of skilled geophysicists and engineers working closely with very experienced and practical field personnel. It is a very effective mix. The company has always been driven by the call to solve problems for clients. Although we are growing, one of the benefits of being relatively small is that the company is able to move flexibly and rapidly to do new things.

What is the main focus of your activities today?

One important philosophy is that we are a fully integrated seismic services company. If necessary, Velseis can provide everything, from survey design, drilling and acquisition, processing and interpretation, to client reporting and consulting. Historically, Velseis has done a lot of work in the coal industry for this reason. The coal industry does not employ a great number of in-house geophysicists, so the company has a role to play in acting as a proxy technical department for coal companies.

In parallel to this, Velseis has always serviced the petroleum industry. In acquisition, we have tended to specialise more on shallow to moderate depth projects, although we also acquire more conventional surveys. We consistently perform a wide variety of petroleum data processing. Of course, over the last two years there has been no escaping the CSG industry, which is now developing to the point where it is a major focus, along with the coal industry, for the company.

How well developed is the seismic data available for coal seam gas companies in the areas where they are beginning to explore and produce?

The process of mapping these areas is just beginning. Coal seam gas companies are trying to map potential locations, and beyond that, once the prospective areas are located, there is a whole raft of technology for finding out more about the deposits: whether there is fracturing or what direction the fractures are in, for example. Finding out more from seismic data about the best ways to extract the available resources is the next step from where we are today.

Velseis has grown over the years to become more and more integrated: today the Velseis group includes acquisition, processing and drilling units, as well as an operation in Indonesia. How did all these parts come together?

Velseis is essentially a technology-driven company rather than a corporate entrepreneurial business. The people in the driving seat of the company are all involved in the technical side of the business. The data processing capability evolved naturally within Velseis: once we had acquired the data, it was natural to process it, because we have technical skills available to do that in the company. The drilling operation was added to the business because we often have to drill shot holes to do seismic work. Some years ago we decided it was going to be more cost-effective for Velseis to have its own drilling division, so we purchased a small drilling company and brought it in-house.

Wanting to be able to provide a timely and integrated service to our clients drove these developments, which cannot always be achieved if you have to rely on sub-contractors. There is not a lot in Velseis’ project workflow that we cannot do in-house.

Our operations in Indonesia arose some time ago: there was an opportunity in the country and a demand for logging services. We went in there in a joint venture arrangement with another company. The business there is now relatively self-contained and autonomous. When we do seismic work in that part of the world it is handy to have a base up there. We can go in and have a lot of the logistics handled.

It is interesting though, because it shows a vision that extends beyond Australia for the company. Do you see that there might be more opportunities for this type of activity in the future?

It is definitely the next horizon for Velseis, in the sense that we have a lot of opportunities overseas that we do not always get to exploit properly, simply because we have everyone busy doing other things. Because the business has been so hot in Australia for quite a while now, you tend to occupy all your key people locally.

Having said that, we work quite a lot in New Zealand: what we try to do is use that business when it is too wet to work here in Australia. Historically, Velseis has worked in New Zealand, Papua New Guinea, Indonesia and elsewhere in South East Asia. However, there is a lot of potential that we are currently not tapping.

This is largely down to key people. You cannot go into these places without taking key people, and it can be a logistical exercise to get equipment and people in. There are associated trade offs with what those people and resources could be doing back in Australia. However, it is an area where we can see a lot of potential, and it is probably something that we are looking to exploit in the coming years.

What can Velseis offer to clients that they cannot get from the bigger geophysical companies?

That is an interesting question. There are definitely some things that the bigger players can offer that are arguably more difficult for us, one of which is volume. Sometimes there will be a need for a company to supply a huge amount of equipment for a very big project. It is possible for Velseis to compete for these projects. We have some long-standing arrangements with rental organisations – when we want to push our channel count up we bring in more gear. However, it is perhaps easier for the larger players to do those types of projects.
I believe Velseis’ unique offering comes in the company’s ability to tailor a service to a particular problem or technical requirement quickly and efficiently. The company has an effective in-house R&D division which is perhaps unusual for a company of our size. We routinely do specialised software development – this might be to tune a particular acquisition program, or to model a particular geological problem. This is all about giving our clients customised, scientific service. I am a geophysicist and am always willing to explore something interesting or something new, and I am the one that has to sign off on it. Arguably this enables more flexibility than in some bigger companies where developmental work might be subject to more formal procedures.

It is very interesting that Velseis has its own R&D department. How did the need for this come about?

Even from its beginnings, Velseis has gone to great lengths to ensure that it employs people with very strong technical abilities. Right from the start Velseis has been a company of geophysicists and seismic people, rather than bankers hiring those people.

In a sense, this means that Velseis tends to look at projects as more than just business. We value having clever R&D people attracted to the company and engaging in interesting activity and developments, because while they are doing research they are also available to give technical support to our operational divisions, and generally improve the quality of the service we offer.

Our R&D people work on a range of problems, often related to our operational projects. In addition the R&D group has completed a number of specific funded projects for the Australian Coal Association Research Programme (ACARP). The company is currently on its third project for them, which provides one ongoing aspect of applied research. We also bring in some funding with these projects.

How is the labour situation today in Queensland for skilled geophysical workers?

I teach geophysics at the University of Queensland, and there is no question that we have picked up a number of good employees just through that connection. Partially because of this connection, Velseis gets involved in university student projects very regularly. Often we have students working for us part time, and as one of the main specialty geophysical companies in Australia, we are a company that geophysics students look to for employment.

At the moment there is a shortage of geophysical graduates across the board, but it has always been a little difficult in Australia: demand for graduates can fluctuate significantly from year to year. The universities in Australia are probably no different to anywhere else: they have become increasingly focused on the high volume professions – the provision of niche courses like geophysics is less attractive from a purely economic viewpoint. Fortunately, at the University of Queensland, geophysical training is done in a very cost-effective way, in that we make significant use of industry people in the teaching of the subject. This also ensures relevance.

A lot of geophysical start-up companies are very science driven, very into innovation, but trying to commercialise that in a competitive marketplace can be difficult. Why is Velseis different?

It is quite possible that if more entrepreneurial people had been running the company, it might have had a totally different direction, but this is the way that it has come out. The people running the company generally make reasonably intelligent decisions on the basis of information available to us. We like to think that there are upsides to the model that we have. There have been plenty of cases with the big geophysical companies starting out as technology driven companies, and at some point in the growth cycle they have moved to having more professional business people running the companies, which hasn’t always worked out for the better.

From your perspective as a company that deals with both conventional oil and gas and coal seam gas, what do you see as the biggest challenges for the industry to overcome before it can realise its potential?

Coal seam gas seems to be a relatively low margin business on the technological side: the work that Velseis is currently engaged in is answering fairly simple geophysical questions, such as trying to locate suitable structures. It is a relatively simple procedure, and it is doesn’t have as many nuances as for example planning a coal mine, which requires a fair bit of detail.

Potentially, there are some other aspects that seismic reflection can bring to bear, related to saying a bit more about not only where the suitable structures are but what they are exactly, whether they are fractured, what is the orientation and density of fracturing, and how much gas is present.

One ACARP research project that Velseis has been working on involves using S-waves. All conventional seismic work is done using P-waves. The use of S-waves has some potential in the sense that they react totally differently to fluids like gas, so it is possible by combining P-waves and S-waves to say something more about the distribution of gases and fractures.

This technology has been used more regularly in the petroleum industry. However, after doing some research into where this technique is being developed elsewhere, we were slightly surprised to discover that we are one of the few organisations that are seriously looking at using S-waves in the coal industry. We have acquired some data that shows there is interesting information to be gathered by using the technique, and it is quite possible that this sort of technology will flow through to the coal seam gas industry. This has the potential to give Velseis better margins on its work for the industry.

Are the companies that you work with in Australia generally interested by innovative new techniques such as this?

Definitely. However, the gas industry as a whole does have an aura of being marginally tight. I do not think anyone would be offended by that statement: from exploration to production the whole process is quite cost-conscious, and so in order to sell a new technology to the gas industry, you have to be able to demonstrate clearly that there is a cost advantage. However, there is scope for the technology to be developed further, and we still have much further to go with seismic techniques. Theory tells us that there are more things we can do, providing we can also develop a cost-effective practical methodology.

What are your ambitions for Velseis’ work in the oil and gas industry, both conventional and unconventional?

We have been growing steadily as a company, and our objective is to keep a solid growth pattern happening. We do not see ourselves in the immediate future getting locked into any large-scale battles for huge data projects with the big international players. At this point we see ourselves as a slightly more specialised company.

Having said that, Velseis is engaging in bigger and bigger projects all the time. We have partnered on occasions with some of the larger players on specific projects, and it is possible that this is a direction for Velseis to investigate further.

One of the big challenges is to bring through more key people. We find that every time we put out a seismic crew, we need to have some of our key trusted people on that crew if we want to do the sort of job we are known for. We do not really want to be sending a crew to Madagascar to operate unilaterally without proper support. We have tried to maintain a high quality in everything that we have done.

Do you have a final message that you would like to send to our readers about Velseis?

From day one doing a technically first-class job has driven Velseis and it is really because of the people that are at the core of the company. Obviously we are well aware of the constraints imposed by logistics and economics. However, we are primarily a geophysical company, and our primary focus has got to be to do an excellent geophysical job.

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