Pemex promises production boost

Mexico’s state oil company plans to ramp up domestic production of crude oil to 2.7 million b/d next year and to 3 million b/d by 2017, buoyed by new shallow-water discoveries and enhanced recovery techniques in mature fields, a key member of the Pemex leadership team told a Houston audience last month. Russell McCulleylistened in. 

At a January energy forum at Rice University’s James A Baker III Institute for Public Policy, Pemex director general Juan José Suarez Coppel said his company was aggressively pushing to boost production to offset a rapid decline in output from the giant Cantarell field. Cantarell produced about 500,000b/d in 2011, down from a peak of about 2 million b/d in the early part of the last decade.

Suarez Coppel sought to tamp down criticism of the NOC, which by Mexican constitutional law is forbidden to enter production sharing contracts with international oil majors. Oil sector reforms in 2009 loosened some restrictions on fee-forservice and performancebased contracting, but fell short of what many experts say is needed for Mexico to successfully exploit its potential deepwater Gulf of Mexico reserves.

Juan Jose Suarez Coppel

‘Usually, when you look from the outside, there’s this vision that in Mexico we are looking for the Virgin of Guadalupe to come help us,’ he said, referring to the nation’s most revered saint. ‘Of course, even geologists with their optimism are not expecting that.’

Suarez Coppel, a University of Chicago-trained economist who took the reins at Pemex in 2009, acknowledged that the company in the past has ‘been run as a government agency’ and has a history of focusing investment on one large find at a time. But reports of a disastrous decline in production are off base, he said.

‘A lot of the time, we hear that Mexico is running out of oil,’ he said, noting that ‘very conservative’ estimates put the country’s amount of prospective resources at 54.7 billion boe, or about 30 years of production at current levels. ‘There is a lot of resource there,’ he said.

To partially offset Cantarell’s production drop, which Suarez Coppel said was anticipated if ‘not as steep as what happened’, Pemex has increased output at several developments, most notably the Ku-Maloob-Zaap complex in the Bay of Campeche. The company has made a number of new discoveries in the past several years, including the Ayatsil-Tekel and Pit-Kayab prospects, and the Kinbe light crude oil discovery and Tsimin-Xux gas find, in shallow waters offshore Ciudad del Carmen.

But the nation’s potential resources are largely in deepwater, which remain a challenge for Pemex. The company needs to invest an average $23 billion in E&P annually to reach its production goals, Suarez Coppel said. ‘People might complain about the cost, but these are very, very profitable projects. Profitable projects bring their own resources.’

The company has invested about $3.6 billion in deepwater and acquired 3D seismic on some 90,000km2, he continued. In 2011, Pemex drilled five deepwater wells and plans to drill another six this year.

Containment service

The company is in negotiations with a pair of firms for access to a capping and containment system that can be deployed in the event of a Macondo-type deepwater spill, Suarez Coppel said.

‘We need the containment service to do the drilling,’ he said.

The director disputed the notion that Pemex lacks the expertise to conduct deepwater E&P. Drilling will be overseen by ‘the same guys that have been drilling our 2000m water depth wells’, he said. ‘These are different companies. We ask those companies to have a given number of years of experience . . . we are confident that we have the expertise there.’

Internally, Pemex has about 150 employees, including many who have trained abroad, who have worked closely with other companies on deepwater drilling. ‘This is a result of our developing human resources, first and foremost, and then getting the practice and technology from other oil companies,’ he said.

Shorter term, he said, Pemex will rely on applying new technology to enhance performance at mature fields – the ‘low-hanging apples’ in the company’s portfolio – and to put more focus on shale gas exploitation.

In 2011, Pemex issued the first tender since the oil reforms were introduced, with contracts going to Petrofac and Schlumberger to reactivate the mature Magallanes, Santuario and Carrizo onshore fields in the country’s southern region. The company hopes to award contracts for six more fields in 2012, Suarez Coppel said.

‘We have a lot of mature fields, and we have to make sure we’re using the best technology,’ he said. OE

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