Private sector Mexico O&G roundup

October has seen a flurry of exploration approvals and withdrawals among private oil companies operating in Mexico, reinforcing a trend toward consolidated operations. 

At the center of attention, a consortium led by Talos Energy has worked to fend off state oil company Pemex's interest in its highly productive Zama offshore site, gaining regulator approval to cede a large swath of offshore territory while maintaining high-potential areas. 

Also, French oil giant Total was given approval by hydrocarbons regulator CNH for offshore exploration. 

Out of the limelight, smaller approvals by CNH also paved the way for drilling wells before year-end.  

There were 21 firms working on 80 authorized projects in Mexico’s oil and gas sector a month ago, and daily newspaper Reforma reported recently that total investment in Mexico’s deepwater offshore sites since the country’s sweeping 2013-14 energy reforms amounted to US$423mn. But development in October point toward smaller, more focused projects.

TOTAL OFFSHORE APPROVALS

On October 15, Total submitted a plan for exploration and extraction at two offshore sites in the Gulf of Mexico, which the company acquired in 2017 and 2018. 

Of the two, costs will be lower (US$7.6mn for geological studies) at the 971km2 Macuspana site off the coast of Campeche, largely because it is in shallow waters of 10-30m. 

At the Salina site, Total proposes to spend US$17.6mn for seismic data reprocessing, as well as related activities such as interpretation and assessment of potential resources and well preparation in 2020.  

At more than US$25mn, the Total plan amounts to the largest private investment in Mexico’s oil sector announced so far this month. It received unanimous approval from CNH. 

HOKCHI AND TALOS CEDE SITES

Early this month, CNH okayed Mexican oil firm Hokchi Energy’s decision to pull out of its assignment at area 2, off the coast of Veracruz. 

Originally thought to hold 142Mboe, Hokchi had led a consortium that included Sierra Oil & Gas, Talos Energy and Premier Oil in drilling two exploratory wells in April-July. These produced disappointing results, with one well showing itself to be non-commercial and the other invaded by water.   

Hokchi signaled its intention to pull out in September. Before voting to accept the move, CNH commissioner Sergio Pimentel said “that’s how exploration is, and that’s why it’s desirable for there to be more exploratory activity and more operators.”

Two weeks later, a consortium led by Talos Energy formally ceded 50% of the offshore area won in the Round 1.1 auction in 2015. (Ceded area in green.)

 

Talos was obligated to make the concession because in September it had requested an extension of the exploration deadline nearer to the three Zama wells, which are thought to contain 1Bb in recoverable oil and gas. 

The requested extension, which was made just before rumors emerged that Pemex may be trying to take over the Zama site from Talos, triggered a clause in the contract that forced the company to give up at least half the site. 

As a result, 232km2 is being given back to the regulator. 

TREVINO

CNH also recently approved a plan by Newpek, a Mexican arm of oil and shale player Alfa, to drill two additional wells at the Treviño site off the coast of Tamaulipas state.

Though a minor project to tap oil from a well discovered in the 1950s, CNH not only supported the plan but offered ways to potentially bring down the drilling costs below the estimated US$2.5mn.

“I think we should take care of the operators also,” said commissioner Néstor Martínez near the close of a CNH session last week.

“The well is vertical, with a depth of 2,984m below sea level,” CNH technical advisor Héctor Silva said. “The drilling is estimated to last 15 days, from December 2-16, and the termination will last eight days, December 16-24, with a cost of US$2.5mn approximately.”  

Source: Comisión Nacional de Hidrocarburos