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With declining domestic onshore and shallow-water production levels, the deepwater Gulf of Mexico represents the country's main chance to restore its upstream fortunes.
Any conversation about the Gulf of Mexico (GoM) upstream industry invariably centers around the offshore activity taking place on the US side of the maritime border. But Mexico's state oil company Pemex is focusing on a strategic push into the deep waters of its offshore portion of the GoM in a multi-billion dollar initiative to restore its declining domestic production levels.
Pemex is forecast to invest US $8.2 billion to explore its Golfo de M?xico B (GMB) area from 2012-26 at an average of more than $431 million per year for the first eight years.
The GMB area spans waters ranging from the shallows out to more than 3,000 m (10,000 ft) and is the most high-profile part of Pemex's nine areas specifically prioritized by the company as being most relevant for current and future deepwater exploration. These nine areas were selected based on criteria including their estimated economic value, prospective size, hydrocarbon type, geological risk, closeness to production facilities, and environmental restrictions. In the entire Mexican deepwater GoM, Pemex believes it has 29.5 Bboe of prospective resources.
The GMB project in the southwest marine region began its evolution in 2003 with the drilling of wells, including the deepwater Nab-1 oil discovery in 681 m (2,234 ft) of water. This was followed up quietly and efficiently with the drilling of a further 14 wells from 2006-2011 that resulted in seven more gas discoveries (Noxal, Lakach, Lalail, Leek, Labay, Piklis, and Nen) and two oil discoveries (Tamil and Etbakel), all drilled in water depths ranging from 680 m to 1,945 m (2,230 ft to 6,380 ft).
Unfortunately for Pemex, post-Macondo public concern is being expressed about Mexico's deepwater plans for the GoM (especially those taking it close to the maritime border with the US) when the state-owned major has already built up a small but exemplary track record with its frontier drilling activities so far.
Plans for 2012 and beyond
This year will see the company continue to implement its exploration strategy, with four wildcat wells to be drilled, targeting the Hux, Kunah, Yoka, and Piklis-1DL prospects. The first two are already under way, with Hux lying in 1,186 m (3,890 ft) water depth and Kunah in 2,147 m (7,042 ft) water depth.
Overall, this is a just an early phase of Pemex's plans to eventually drill at least 70 wells in the GMB area while it evaluates potential recoverable reserves estimated at more than 3.1 Bbbl. At this stage around 29 will be drilled in the Holok area, 19 in the Han area, and 18 in the Nox-Hux area, with the rest split between the Lipax and Temoa areas.
It also will carry out more than 100 geologic surveys and shoot more than 15,500 sq km (5,600 sq miles) of 3-D seismic data.
Pemex's CEO of its E&P division, Carlos A. Morales, has consistently pointed out in recent media briefings that the company has the experience to tackle its deepwater assets and that it remains the biggest operator in the GoM, both in terms of production and the number of rigs it operates (currently more than 80 offshore rigs). "Yes, we're going to Perdido this year, in a few months," he said. "And yes, we are in compliance with all of the requirements."
The company is, however, taking action to put in place the necessary safeguards in this highly public program. It already has signed a contract with Wild Well Control, the Houston-based blowout specialist, and also is in the process of joining the Helix Well Containment Group.
Additionally, the company is being closely monitored by Mexico's upstream regulatory agency National Hydrocarbons Commission (CNH), which has stipulated that Pemex must obtain environmental authorization for all activities and CNH approval for wells drilled in more than 1,500 m (4,921 ft) water depth. It also must submit detailed multiyear drilling and study programs, quarterly reports, and comparative analyses of projected versus actual results as well as several other detailed reports.
The company is using three deepwater rigs to carry out its drilling program, including the recently-built Bicentenario semisubmersible unit, which has been leased for five years at $530,000/day and will carry out much of the Per-dido activity. The rig drilled its first ultra-deepwater well for the company in mid-2011 and was immediately successful, making the natural gas and condensate discovery Piklis near its Lakach gas field. The Piklis-1 well is the deepest Pemex has drilled so far, in a water depth of 1,945 m (6,380 ft) to a total depth of 5,400 m (17,717 ft).
Pemex also is likely to use Seadrill's West Pegasus semi-submersible rig, previously known as Sea Dragon, to drill some of the wells. The rig has been signed for a five-year term valued at around $850 million.
Areas where the Mexican major readily admits it is lacking experience mostly involve aspects related to deepwater production issues, including the design, installation, and maintenance of production systems. It has, however, established several technology partnership agreements with international oil companies such as Shell, BP, and Petrobras, which it is starting to take advantage of as it builds up its internal expertize.
The company's senior management has long stated its admiration for the way Petrobras has gone about developing its deepwater reserves and the way it has largely used FPSOs as early production systems for its fields. With Mexico's lack of yards with FPSO fabrication capabilities, it is likely to adopt a leasing policy for its first few units.
This also is not stopping it from proceeding at pace with its first deepwater development; the Lakach field is expected to start flowing initial gas in November 2014. The field's 850 Bcf of proved and probable reserves will be developed via a subsea-to-shore scheme in conjunction in later phases with other satellites, including Labay and Piklis. The field, located approximately 60 km (37 miles) southeast of Veracruz, will produce via seven subsea wells, two subsea manifolds, and two 18-in. gas pipelines to shore.
When Lakach starts to flow, it will signal what Pemex hopes will be the start of a new era for Mexico's domestic industry.