Mexico held back-to-back licensing rounds on 12 July 2017 as part of the President Enrique Peña Nieto administration’s goal to lure private investment to the Latin American nation’s upstream.
To use an American baseball analogy, Mexico knocked it out of the park each time and now Mexican oil and gas is gaining momentum.
The duo-round system on 12 July encompassed a total of 24 blocks. By the end of the day, 21 blocks had been awarded.
The 12 July bid round blocks were varied in that they spanned Mexico’s vast geography, from the northern Burgos Basin to the southeastern Sureste play. Blocks were also located in the Chiapas Foldbelt, Tampico-Misantla, Veracruz, Salina del Istmo, and Macuspana basins.
In the second auction (Round 2.3) of the day alone, the blocks included 25 producing fields. The total combined area covered 2,595 sq km and are thought to hold prospective resources of 251 MMboe.
Given the highly competitive nature of Round 2.3, there were more than a few Mexican style stand offs as bidders went head-to-head over a raft of highly-prized blocks.
Winners were only declared after officials sliced open the “tiebreaker” cash bonus envelopes. At one point there was a seven-way tie for Area 5 in the Tampico-Misantla Basin. Each bidding entity offered an additional royalty rate of 40% with an additional investment factor. A US$ 26.1 million tiebreak bonus landed Mexican startup Jaguar the contract. In all, Mexico raised US$ 88 million alone from the cash bonuses on 12 July.
CNH Director Juan Carlos Zepeda has estimated that the wining companies—including Mexican tycoon Carlos Slim’s oil and gas company Carso, will plough some US$ 2 billion into the investment-starved onshore.
That money will help Mexico pump more Black Gold. Winning companies from rounds 2.2 and 2.3 are forecast to produce an additional 79,000 bo/d and 378 MMcfg/d by 2025. Initial output should begin as early as 2019.
Moreover, the rounds will aid Mexico to create 20,000-plus jobs in the next seven years, says Deputy Energy Minister Aldo Flores.
Round 2.2 and 2.3 are also part of a wave of ongoing licensing success for Mexico.
Since 2015, Mexico has offered a total of 94 blocks to the industry. Despite volatile oil prices, the CNH has awarded 70 blocks. That’s equivalent to 74% of the total inventory.
“That’s well above what was hoped for,” says Sener chief Pedro Joaquin Coldwell.
Beyond having a transparent bid round framework, empty pipelines and storage facilities have helped shore up the industry’s interest in Mexico.
Mexico’s dramatic 1 million-plus bo/d decline in oil production over the past decade has left critical energy infrastructure in the shallow-water sector and onshore with spare capacity. Decades of under investment on part of Pemex means that fields with 3P reserves still have ample room for further exploration.
Mexico, and the mexican oil and gas industry – by all accounts, isn’t about to let that momentum grind to a halt.
The Comision Nacional de Hidrocarburos (CNH) in July 2017 announced that the highly anticipated Deepwater Round 2.4 will take place on 31 January 2018. Thirty areas will be on offer spanning the Cordillera Mexicana (Mexican Ridges), Salina Basin and Perdido Fold Belt.
Round 2.4 encompasses a total area of 70,844 sq km. Of the 20 blocks, 21 have a surface area of 2,000 sq km; eight cover 3,000 sq km and one covers 4,400 sq km. The Mexican Energy Secretary (Sener) said that if only 25%, or seven contracts, are successfully auctioned off, the government is still forecasting that the contest will lure in some US$ 31.5 billion in investments.
With seven licensing processes under its belt, including one previous Deepwater Round (1.4) in December 2016, which saw some of the world’s largest NOCs and IOCs, such as China National Offshore Oil Corporation (CNOOC) and Chevron, respectively, win acreage, Mexico is bearing the fruits of energy reform in other areas.
In July 2017, the Talos Energy-led group announced a discovery with the Zama-1 (Zama-1SON), located on Block 7 (Contracto CNH-R01-L01-A7/2015). The well found a contiguous gross oil bearing interval of over 335m, with 170m-200m of net oil pay in Upper Miocene sandstones with no water contact.
Initial gross original oil in place estimates for the Zama-1 well range from 1.4 Bboe to 2 Bboe.
Talos operates Block 7 with 35% WI. Sierra holds 40% WI and Premier holds 25% WI, after Premier exercised its option to increase to 25% from 10% WI.
That wasn’t the only good news Mexico reaped from the Round 1 blocks. Eni reported in July that the Amoca 3 (Amoca 3DL) well (CNH-R01-L02-A1/2015) encountered multiple “significant oil levels” in the Cinco Presidentes (Early Pliocene) and Orca (Middle Pliocene) formations during drilling operations.
The well encountered 410m of net oil in the deeper sequence of Cinco Presidentes, and in various cluster levels of Pliocenic age, demonstrating “good reservoir characteristics.” Eni boosted the resource estimate of the Amoca field to 1 Bboe in place and the Area 1 total estimated resource base to 1.3 Bboe, of which 90% is oil, with further upside.”
The companies are now mulling development.