Mexico aims to increase output

According to Mexico’s National Commission on Hydrocarbons (CNH), of the 21 exploratory wells drilled in Mexico during the first three quarters of 2014, only seven had commercially viable oil or gas production. CNH also said that state firm Pemex originally had intended to drill 53 exploratory wells, and was not only far behind in its drilling schedule, but also experiencing a very low success rate.

Low success rate. Between January and September, only one-third (seven) of the exploratory wells were successful, compared to the previous year, when the success rate was 60%. This lower success rate has dropped the rate of reserve replacement. Of the successful wells drilled, four were dual completions producing commercially viable amounts of oil and gas, one produced wet gas, one produced dry gas, and the last one produced gas and condensate.

Fig. 1. Offshore blocks offered in Round One. The Salina basin is offered in Blocks 1 to 13, and the Macuspana basin is shown in Block 14. Click image to enlarge

One reason for the low success rate is that Pemex is exploring in challenging regions, in areas with higher pressures and greater depths than usual. Because of these low success rates, and coupled with the new Energy Reform Law signed in November 2014, Pemex has signed a memorandum of intent with Eni to evaluate potential E&P activities, as well as pursuing refining and petrochemicals. The agreement also will drive a cooperative framework for reducing emissions.

This year, 2015, will very likely be the most important year in the modern history of Mexico’s oil and gas industry. This is not only because implementation of the new Energy Reform Law will begin, but also because this law is much desired and anticipated by the government to stimulate economic growth. CNH said that companies, or consortia, wishing to participate in contract bidding in Mexico for exploration and extraction of hydrocarbons in deep water, will be limited to submitting bids for no more than five areas. Pemex will release 14 contracts up for bids in the Gulf of Mexico, for which success is now in question, given that the price of crude oil has dropped.

“Pemex, with the new reforms, wants to have a competitive and diverse participation, avoiding a concentration in few hands and in a few business groups,” said Juan Carlos Zepeda, CNH president.

Outside investment. From now on, Mexico is betting on big investments in its first round of exploration bids, Round One, to try to shore up its faltering oil and gas production. The country’s production in 2014 dropped to about 2.4 MMboed from 2.5 MMboed at the end of 2013.

The assigned exploratory areas are those that have been studied in more detail by Pemex, so there is a greater certainty of finding reserves from the migration of existing contracts, the Integral Contracts for Exploration and Production (CIEPS) and the Publicly Financed Works Contracts (COPF), to the new contractual forms envisioned in the new Energy Reform Law. The first package began with the migration of 11 oil field contracts between September 2014 and March 2015. These fields are in southern Mexico and also include Poza Rica. In northern Mexico, Altamira and Burgos hold more than 569 MMboe in 2P reserves, and prospective reserves of 1.3 Bboe also have been transferred over to the new contracts.

The second main concern, and most important in the short term, is Pemex’ search for partners to develop the fields assigned to it during Round Zero. Pemex has identified 10 oil fields among its assigned tracts that are available for making strategic alliances with partners during the 13 months that began in Nov. 2014 and run through the end of 2015.

In 2015, Pemex will evaluate several groups of properties, including mature fields with potential for applying EOR technologies; quantities of unconventional oil and gas from shale; and the Maximino deepwater oil field. 

Round One. In this upcoming round, 169 blocks will be offered for bidding, of which 109 are exploration projects, and 60 are for extraction. Pemex hopes to attract annual investments of $12.6 billion for four years. The blocks cover an area of 28,500 km², of which 91% are exploration areas, and the remaining 9% are oil fields for development and production. The 2P reserves and prospective resources up for bidding represent a volume of 3.8 Bboe and 14.6 Bboe, respectively.