Pemex’s major oil find in the deep waters of the Gulf of Mexico after several attempts has been called promising for a company that has had its share of struggles; however, the significant discovery won’t come without challenges, analysts said.

The Mexican national oil company and the country’s president, Felipe Calderón, recently announced the successful discovery of crude oil in the Trión 1 well, 177 km (110 miles) off the coast of Tamaulipas. Production from the oil field, if its reserves are confirmed, could be equivalent to a third of Pemex’s annual national production, the president said.

The well was drilled to a total depth of 2,500 m (8,202 ft). The company said the find increases certainty toward the recovery of prospective resources in the Perdido area project. There, an estimated 10 Bboe could cause a surge in supply for the country’s oil demand.

“From a strategic standpoint, this type of discovery is very important for Pemex because it’s been on a very steep reserve and production decline over the last several years,” said Claudia Pessagno, senior analyst-equity research for IHS. “So they definitely need good news, and they need to tap the potential that is out there. It’s just a matter of how fast can they get this done and how are they going to pay for it.”

For the past couple of decades, lack of technological expertise and funding has put Pemex at a disadvantage, Pessagno said. The company will need a substantial amount of money to develop its latest find and doesn’t have the help of foreign companies due to government restrictions. And although there has been talk of attempts to put through reforms, which would call for a change to the constitution, such as allowing some privatization of Pemex, the change will be difficult because the country has been accustomed to operating as a fully national-owned oil company since the oil industry was nationalized in 1938.

“It has significant challenges ahead to say the least. Financially, it’s a very unique situation in that the government takes practically 100% of the company’s earnings,” Pessagno said. “So they really don’t have a lot of freedom to spend the money the way a privatized company would be able to. That is a significant disadvantage for them.”

Lysle Brinker, director of equity research-integrated oils and NOCs for IHS Herold, added the development will likely be a costly one. “The government may have to invest more money [in the development], which means it’ll have less money to spend on other areas.”

While announcing the discovery, Calderón said investment in Pemex has resulted in positive outcomes.

“First of all, we have managed to reverse the decline in oil production registered in recent years as a result of the natural depletion of the Cantarell Oilfield, for many years the supplier of over 60% of the national oil company’s petroleum,” he said. “Second. We have also reversed the problem we had registered in the reserve replacement rate. At the beginning of the last decade, Pemex’s reserve replacement rate was approximately 23%. This meant that for every barrel of oil discovered, four or five barrels had already been sold that day, threatening the long-term stability of petroleum production.

“And through the investment we have made in Pemex, we have already reversed that problem. The year before last, we achieved a proven reserve replacement rate of 100% and this year, we have attained a proven reserve replacement rate of over 100%, achieved in February. This means that for every barrel of petroleum extracted, that same day or at the same time, another barrel is being replaced as a proven reserve. This is a key feature for ensuring the long-term permanence of the national oil industry and Pemex.”

The latest discovery could help Pemex certify new 3P reserves, expected to produce from 250 million to 400 million more barrels of crude oil.

Pemex reported the total well thickness saturated is 320 m (1,050 ft), with porosity between 18% and 25% and permeability of up to 250 millidarcies, which guarantees productivity and an estimated flow of up to 10,000 b/d. Plans are for the company to drill the well deeper. For the Trión 1 well, one of the company’s latest generation drilling rigs – with a capacity to reach depths of 9,000 m (29,528 ft) under the seabed – was used.

“At the beginning of [this administration] nearly six years ago, we received a firm whose production was in decline. Today, we leave a firm whose production has stabilized and is already registering significant marginal increases, since it has stopped the decline Petróleos Mexicanos had experienced for several years,” Calderón said. “We received a firm with replacement rates of less than 50%, and we are handing over a firm with a proven reserve replacement rate of over 100%. We received a firm that had not been able to successfully engage in deepwater exploration.”

But that also has changed.

Contact the author, Velda Addison, at vaddison@hartenergy.com.

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