Nearly 40 years ago, oil-company scientists began experimenting with a new way of acquiring higher-resolution seismic data using three-dimensional arrays rather than individual two-dimensional lines. In those days, 2D surveys were still state-of-the-art. Since computers were applied primarily to seismic-data processing, interpretations were done manually with stacks of paper sections spread out on drafting tables or hung along hallways. It took almost 25 years for those early experiments in 3D seismic to evolve into one of the energy industry's greatest technological revolutions for finding and managing oil and gas reservoirs. As the geophysical industry today faces yet another slump, or "valley of despair," there are lessons from its history from which to learn. The industry will, once again, reinvent itself. Here's how. The 3D wave In 1982, approximately 95% of seismic shoots were 2D. Only a few large oil companies were willing to invest the substantial amount of capital necessary to acquire and process newly emerging 3D seismic. A few technical visionaries in the industry foresaw the enormous future potential of 3D, but most oil company personnel were skeptical it would ever amount to anything but a niche technology. "It's too expensive and much too complicated," they complained. "It takes too long to process and interpret. Besides, how many geophysicists know what to do with all that data anyway?" At that time, the budding new technology lacked a sufficient track record to get many observers excited. Meanwhile, 2D technology was maturing and rapidly approaching the point of diminishing returns. It was becoming increasingly difficult to find meaningful exploration plays even with the most advanced 2D, except in frontier areas where seismic data had not yet been shot. Many of the older basins in the U.S. and other parts of the world were being written off as largely depleted of significant remaining reserves. The seismic acquisition industry, therefore, experienced a slump as new activity retreated to more remote parts of the world, as 2D libraries in highly explored regions filled with data, and intense competition relentlessly eroded everyone's margins. That's when people started taking 3D seismic more seriously. But even the most optimistic early enthusiasts underestimated the magnitude of the impact 3D technology would have on the global industry during the next two decades. Rapid increases in computing power fueled more efficient processing workflows, while the arrival of interactive workstations and user-friendly interpretation software were key enablers for 3D seismic to catch fire. And, it did. Despite an industry-wide depression during the 1980s, companies dedicated to the new technology-such as Landmark, Input/Output and Geco-arose and flourished. 3D technology promised to rescue an ailing industry in desperate need of new places to drill and better ways to lower costs. By the early 1990s, with success stories appearing weekly, 3D seismic crossed "the chasm" of acceptance into the mainstream marketplace. The majority finally started to buy en masse. The 3D seismic business enjoyed phenomenal growth through the next five years, reaching a peak around 1997. Not surprisingly, due to excess capacity built by the service sector, the market overheated and a slow-down commenced. More recently, a significant indicator of 3D-market maturity has been the decoupling of the seismic crew count from the rig count. An increase in spending for drilling no longer indicates a proportional increase in seismic acquisition. It's wishful thinking for the geophysical industry to assume this is a short-term phenomenon that will be cured by an overall rise in industry spending. 3D seismic technology holds much the same position today as 2D seismic did in the early 1980s, when the low-hanging fruit pretty much had been found and most of the new surveys were concentrated in remote parts of the world. The only way to regenerate the seismic industry now is with a new wave of seismic technology to unlock remaining reserves in substantial enough quantities to bring new life to mature oil and gas regions. The shear wave And, a promising new technology already exists-multi-component seismic, commonly called 3C (three-component) and 4C (four-component) or shear-wave seismic. Except, the industry is trapped in a "valley of despair," which represents an inevitable market gap that corresponds with a long gestation period between two different technology life cycles-a period when only the early adopters can see the hope of the next generation. Just as they said in the early days of 3D seismic, the 3C/4C naysayers are making a familiar cacophony: it's too expensive; successes are too limited; there are too few well-defined applications. Yet, a few early adopters-representing 10% to 15% of the future market-are beginning to embrace the technology. It will likely take an additional five years or more for the early-adopter segment to fully develop. The late adopters of 3D technology-who, amazingly, are just now starting to use 3D, and who can therefore buy it rather cheap-amount to about 15% of the total market for seismic data. The other 70% don't see any way out of the valley; hence they have become extremely pessimistic about the future of the global geophysical industry. What the shear-seismic skeptics, like the early critics of 3D, should understand are the following: • Unlike in the early 1980s, the energy industry today has already deployed much of the computing infrastructure needed to take advantage of this next wave of seismic technology. Back then, desktop computing was a novelty. The 1980s began with senior management debating whether or not all technical professionals should have personal computers. Today, by contrast, oil companies large and small have embraced computers for all employees as a way of life. In addition, the horizontal IT industry has enough advanced technology "on the shelf" -at increasingly lower costs-to satisfy the computing requirements of multi-component seismic processing, analysis and interpretation. • Second, many untapped oil and gas reservoirs remain hidden due specifically to problems that shear-seismic technology will eventually address. Poor seismic imaging due to gas attenuation, lithology-related velocity modeling problems, stratigraphic trap resolution and fluid identification are just a few of the areas where shear-seismic data can help solve today's most intractable reservoir puzzles. As the past has shown, the secret to unlocking more oil and gas resources often comes through integrating new forms of measurement with existing subsurface data. Today, ever-increasing computing power has given us the unparalleled ability to combine diverse data types rapidly and mine them for hidden information. Pattern recognition, for example-an emerging science driven by advanced technology-is enabling petroleum geoscientists to develop effective new interpretation methodologies. These approaches are based more on seismic attribute analysis and direct detection of hydrocarbons than the standard process of "backing into" the location of potential oil and gas traps through mere structural mapping. Shear seismic, poured into the integration hopper, will become a key ingredient in this emerging field of data-mining and pattern recognition, yielding remarkable breakthroughs in finding new reserves. • Third, as the world's oil basins mature, the need to extract greater amounts of production from proven reservoirs is becoming more critical than ever. To date, the industry's ability to measure dynamic fluid movement through the reservoir using conventional seismic data has been stymied by the problem of accurately identifying different fluid types. Standard p-wave (or compressional) seismic measurements alone cannot satisfactorily resolve the problem. However, when compressional data are combined with shear-wave measurements, dramatically enhanced are the ability to image fluid fronts and improve production performance through more intelligent deployment of reservoir management technologies. The trend toward miniaturization of geophysical and other sensors that enables permanent monitoring of fluid flow is likely to become mainstream toward the end of this decade. Shear-seismic measurement will become a strategic component at the heart of these new dynamic reservoir systems. Business models Given the exciting opportunities offered by shear seismic in coming years, now is the ideal time for the geophysical industry to reexamine and reinvent its business models. To capture their fair share of value created this time around, acquisition companies need to pay more attention to marketing strategies appropriate to the position of each seismic technology on its respective diffusion curve. For example, the current practice of shooting speculative marine surveys with emerging 4C technology, rather than aggressively pursuing more proprietary shoots, is a huge mistake. Spec surveying is a technique aimed at majority-market buyers, who are more sensitive to price. But the reality is that only a fraction-less than 15%-of the industry is interested enough to buy at this stage of the game. By mistakenly applying a mainstream strategy to the early adopters, seismic companies are cutting their own throats. That segment of the market would be willing to pay a premium to acquire shear-seismic data, if they were well enough educated on its potential competitive advantages-because that, not price, is what they care about most. In the future, as the next wave of technology crests, the seismic industry also needs to remember that the arrival of late-majority buyers is a good prognosticator of a slowing market. To prevent overbuilding capacity at that point, geophysical companies must resist the temptation to falsely extrapolate rapid growth rates that apply only to the front-end of the diffusion curve. It is terribly unfortunate the geophysical sector, which has contributed so much to the success of finding and exploiting oil and gas for so long, has failed to share proportionally in the wealth that has been created. As it is entering this next significant cycle, one hopes existing companies-or new players-will get it right this time. From promise to profit As in previous oilfield-technology life cycles, the early adopters of shear seismic will be the first to turn the promise of this new technology into profit. While those E&P companies and individuals who first ride the shear seismic wave will experience all the difficulties of launching an unfamiliar, new approach, they will also enjoy some of the greatest benefits. Not only will they gain early access to large new reserves, either through exploration or next-generation exploitation, they will take a decisive leap past their more hesitant competitors. This turbulent time will create opportunities for the formation of new companies in both the service and oil and gas sectors, challenging older companies to reinvent themselves. Predictably, early exposure to shear seismic will seem like a mistake to some, as they misinterpret initial failures and condemn the tool as ineffective. Not recognizing the opportunity, therefore, they will risk fading into obscurity, as so many in our industry have done in the past. Inevitably, however-and with much the same force as the 3D wave before it-the shear seismic wave will sweep the upstream energy industry. It has already passed the technological innovators and is currently being embraced by visionary early adopters. The advantages experienced by those who first deployed 3D seismic in the late 1980s will accrue once again to the initial players in shear seismic technology. Shear seismic, I believe, is the way out of the valley. Therefore, the strategic question facing oil and service companies, and the investors who fund them, is where on the technology-diffusion curve will they choose to commit? Now is the time when the greatest competitive edge will be gained and the leaders of the future will be made. Within five years or so, the rest of the market will begin to grasp what only a few realize today about the promise of this technology. And within 15 years, the laggards will discover what everyone was so excited about. But, once again, they will be relegated to picking over the remains of what others left behind, too late to make a real difference. Bob Peebler is president and chief executive officer of Energy Virtual Partners, an asset-management service, as well as a member of the board of Input/Output Inc. Previously, he was vice president of e-business strategy and ventures for Halliburton Co., and president and CEO of Landmark Graphics. THE TECHNOLOGY ADOPTION LIFE CYCLE According to Geoffrey A. Moore, author of Crossing the Chasm, whenever a high-tech innovation enters a market, respondents tend to fall into five fairly distinct categories over time, represented by a standard bell curve. • The Innovators (I) are technology enthusiasts who are first-adopters, often the minute the technology appears and usually before its benefits have been proven. They expect to live with considerable bugs and difficulties, but consider it worthwhile as long as they are seen as innovators. • The Early Adopters (EA) are visionaries with their feet on the ground. They embrace the new technology because they believe it offers a real competitive advantage over others less willing to go out on a limb. They hope to break away from the herd and establish themselves as leaders of the next generation. They tend to grab the low-hanging fruit just out of reach of competitors. • The Early Majority (EM) or mainstream market consists of pragmatists who consciously choose to stay with the herd until the new technology has been adequately tested and successfully implemented by more daring souls. They tend to keep in touch with the market and pay attention to what everyone else is doing. Then, they try to be "fast followers" once a clear new direction has been established. • The Late Majority (LM) take a highly conservative approach, deliberately avoiding the new technology because the old technology still works, is more familiar and costs less. They make the switch when there are no more bugs, and the market leaders have left them behind. Then, they play catch-up for years, until the next technology wave arrives and threatens to swamp them again. • The Laggards (L) tend to downplay the value of almost any new technology. They feel validated when over-hyped technologies fail to gain widespread acceptance. They run a greater risk than the Late Majority of extinction. Between the Early Adopter and Early Majority markets lies a chasm-a period of time in which new technologies are essentially not being adopted while the market makes up its mind. Judging when and whether a particular technology will "cross the chasm" often determines who wins and who loses the competitive battle of the future.