Hokchi begins production at shallow-water field likely to define its future

Hokchi Energy said on Tuesday that it began producing oil from its shallow-water field on Sunday, marking first oil from a site likely to determine the company’s future.

The oil comes from Hokchi-4DEL, a delimiter well that Mexican hydrocarbons regulator CNH approved in December 2019.

Hokchi, a subsidiary of Argentine E&P Pan American Energy, originally won the 263km2 area, Block 31 in Mexico’s oil-rich Cuencas del Sureste, in 2018's auction Round 3.1.

Source: BNamericas project database

Hokchi-4 is one of two wells at the 30m-deep site where production will be overseen by the company’s satellite platform, and it is linked up to pipelines that tie-in to Mexican NOC Pemex’s infrastructure. All told, the Hokchi field could yield 148Mboe and 45.4Tf3 of gas. 

“With an early production strategy, Hokchi is taking advantage of the constructed transport infrastructure to carry the hydrocarbons from the platform to land...where the oil and gas will be separated so that it can be sold at Pemex Exploración y Producción’s Ceiba Battery Port,” the company said in a press release.

Separation will take place in the town of Paraíso, Tabasco state. Already one of Mexico’s principal oil hubs, the area is also the site of Pemex’s under-construction refinery at Dos Bocas.

The Hokchi field will also include a second platform, the “central”, along with marine pipelines and terrestrial infrastructure. 

Malaysian E&P Sapura Energy installed the 1,730t satellite platform for Hokchi in March.

BREAKING THE SPELL OF HARD LUCK

Even before the recent fall in oil prices, Hokchi had suffered setbacks that raised the stakes of its bet on the Hokchi field. 

Through an asset-sharing deal hashed out with Talos Energy in 2018, Hokchi had gained operator rights for a consortium - including Sierra Oil & Gas, Talos and Premier Oil - to develop an adjoining block, Area 2. 

Hokchi then handed Area 2 back to CNH in October last year. Having spent over US$44mn on two exploratory wells, the Hokchi consortium determined after drilling that the area was commercially unviable.  

In April and early May, as energy firms began exercising force majeure clauses to avoid costly drilling when oil futures contracts actually went negative for a time, Hokchi was thought to be under stress. It had already submitted its whole plan for 2020, potentially forcing it to pay large fines if eventual production fell short of its commitments by more than 30%. 

Now, with oil prices having recently stabilized, and Hokchi-4DEL coming online, the company seems on track to ramp up production.