Mexico announces biggest onshore oil discovery in 15 years

By Amy Stillman and Cyntia Barrera Diaz on 11/6/2017

MEXICO CITY (Bloomberg) -- Petroleos Mexicanos announced its biggest onshore discovery in 15 years, just three months after Mexico reported the first major find by private companies, bolstering the nation’s efforts to revive its oil industry.

The Ixachi-1 well that lies 72 km (45 mi) south of the port of Veracruz is believed to contain 1.5 Bbbl of oil in place, or about 350 MMbbl in proven, probable and possible reserves.

Production of light oil and wet gas could start “in a year, the end of 2018 or 2019”, Pemex CEO Jose Antonio Gonzalez Anaya said Friday in a phone interview. “It is in an area where there is already a lot of infrastructure that will help to develop the field.”

For Pemex, the find comes amid declining output and continuous budget cuts. Mexico is counting on an energy reform approved in 2013 to help revive the ailing industry and the state-owned oil company. Joint ventures with international exploration firms will allow Pemex to reach areas that demand heavy investment and state-of-the-art technology. About a fifth of Mexico’s public budget relies on oil revenue, with production averaging 2.15 MMbpd last year, the lowest level in more than three decades.

“This is the most important discovery in onshore fields by the company in 15 years,” said Mexico President Enrique Pena Nieto during an event on Friday at the Tula refinery in Hidalgo state. The find is located next to already existing infrastructure and extracting the crude will begin “relatively soon,” he said.

The discovery follows the announcement in July by Premier Oil Plc, Sierra Oil & Gas and Talos Energy LLC of a reservoir with an estimated 1.4 Bbbl to 2 Bbbl in shallow waters.

Pemex has yet to determine the amount of investment needed to develop the discovery or whether the company will seek partners, according to Gonzalez Anaya. “First we have to begin with a plan for development before we know how much it’s going to cost,” he said. ‘There’s a lot of work to do.”

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