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Pemex seeks partners to maintain production at marginal fields

Mexican state-owned Pemex’s upcoming farmout program is expected to boost oil and gas output aggressively across seven mature fields by 2020 to stave off a sharp drop in production.

Data from Mexico’s National Hydrocarbon Commission (CNH) showed Pemex was looking for partners to increase production at seven onshore clusters to as much as 47,360 b/d and 526.35 MMcf/d by 2020.

According to its 2017-21 business plan, Pemex has an aggressive farmout program which, if successful, could add 267,000 b/d by 2020, increasing the company’s total output to 2.072 million b/d.

The seven onshore clusters are in southern Mexico and are composed by exploration areas and mature fields with as many as 45 years operating. The clusters are Artesa, Juspi-Teotleco, Giraldas-Sunuapa, Bedel-Gasifero, Bacal-Nelash, Cinco Presidentes and Lacamango.

To date, CNH has already supported Pemex’s plan to join several fields to create the clusters to farm them out.

Potential partners will help a cash-strapped Pemex, with limited know-how in enhanced oil recovery technology, increase production.

If Pemex successfully farms out these clusters, it expects to invest along with its partners close to $4.65 billion over the life of the seven clusters.

Pemex has been investing the minimum necessary to maintain operation in these clusters, reducing production to 14,100 b/d and 89.63 MMcf/d by 2020.

While the seven clusters were expected to be tendered this year, neither Pemex nor CNH has disclosed a date.

According to CNH data, the seven clusters held a total 191.3 million barrels of oil and 951.3 Bcf of gas (3P) in January 2017.

The exploration potential of the Bedel-Gasifero, Giraldas-Sunuapa, Juspi-Teotleco, and Artesa clusters is promising, with Pemex having 17 exploration targets with a combined prospective resource of 443 million barrels of oil equivalent, CNH data showed.

FOCUS ON MARGINAL FIELDS

Pemex has undergone an austerity program since oil prices crashed in 2014. Its authorized 2018 E&P budget is $9 billion, compared with $22.5 billion five years ago.

About 65% of Pemex’s E&P budget is set to maintain production at 18 fields which represent 75% of its oil production such as Ku-Maloob-Zaap and Ek-Balam.

Also, the company set apart 14.5% of its budget for exploration efforts, leaving about $1.84 billion available to operate over 260 production blocks.

Budget constraints leave marginal projects outside of Pemex’s operational scope.

Pemex auctioned its first two mature fields in October. CNH awarded Pemex’s Ogarrio and Cardenas-Mora farmouts to Germany’s DEA Deutsche Erdoel and Egypt’s Cheiron Holding, with contracts signed this week.

The fields produced 11,750 b/d in January, which Pemex hopes to boost to 29,000 b/d in the short term.

Smaller fields are often attractive to medium and small-sized operators as they have low production costs. For example, Ogarrio production costs are around $11/b, while at Cardenas-Mora it is $16/b, according to CNH.

Current clusters on auction have extraction costs as low as $7/b, CNH has said.

LIMITED BANDWITH

Last year, Pemex said it was looking to farm out as many as 74 clusters composed of 155 prospective production and 66 exploration areas, which would represent over 55% of all its production and 65% of its exploration portfolio.

At CERAWeek Tuesday, CNH President Commissioner Juan Carlos Zepeda told S&P Global Platts there was an opportunity for Pemex to farm out extra-heavy oil offshore fields, with an API gravity around 11.

Several of these blocks were discovered by Pemex years ago but never developed due to relatively low oil prices. However, these fields are profitable under the current price environment, Zepeda said.

The extra-heavy oil fields are likely to be producible in as little as 2-3 years after contracts are signed, he said, disclosing potential extra-heavy fields Pemex could farm out include Ayatsil-Tekel and Pit-Kayab.

These blocks are north of the prolific Ku-Maloob-Zaap field in the Sound of Campeche.

Since energy reform was implemented in 2014, Pemex has planned to farm out Ayatsil-Tekel-Utsil. In 2015, CNH approved Pemex’s plan to farm out the cluster, which has 2.06 billion barrels of 3P reserves, according to the commission’s database.

There are no public records at CNH showing Pemex has expressed interest in migrating Pit-Kayab, which has 3P reserves of 1.3 billion barrels of oil.

Pemex CEO Carlos Trevino said at CERAWeek Tuesday that those fields were not on the agenda in the near term.

“I agree that maybe [extra-heavy oil] is a good idea, but our pipeline of projects cannot handle more than we are doing already,” Pemex said.

“So, maybe they will be in the next batch.”
Source: Platts

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