Achieving 100% Reserves Replacement Ahead of Schedule

At the inauguration of the Bicentenario semi-submersible drilling rig in February 2012, Mexican President Felipé Calderón announced that Pemex had already achieved the goal of 100% 1P reserve replacement in 2011, a target that was set for 2012. “We have achieved our aim proposed many years ago. This means Pemex’s production is now guaranteed to be permanently viable, so we can guarantee the future for all Mexicans.” Whilst this statement might be somewhat overstating the permanence of securing 100% 1P reserve replacement for one year, the sentiment of having achieved something impressive is understandable. It was only in 2004 that Pemex’s 1P reserve replacement level stood as low as 23%. Results have improved dramatically since then, with the 2010 figure standing at 86%, but it was only in 2011 that the company managed to completely replace its production with proven reserves.

Carlos Morales Gil, Director General of Pemex Exploration and Production, details the company’s eorts in reaching its 100% reserve replacement target. “Only 20% of our 2011 reserve replacement performance is supported by new discoveries; the other 80% comes from development and reservoir management. By addressing declining trends and increasing recovery factors at existing fields, we can boost our reserve levels. Although this activity started several years ago, the restructuring of Pemex E&P gave us a big boost because it meant we had several regional production oces dedicated to reservoir management practices. Of course, exploration has its role, but this is more related to the 3P reserve rate than to the 1P reserves.”

In explaining the company’s recent ramp up in reserve replacement, Morales Gil says that the company has significantly increased investment in exploration activity, from US$160 million in 2000 to US$2.72 billion in 2011, although he admits that this probably says more about the company’s previous under-investment in exploration in years past than about the company’s current exploration investment levels.

When talking about Pemex’s exploration success rate, Morales Gil says that Pemex’s impressive 50%+ exploration success rate comes from balancing exploration risk with the chance of success in the NOC’s dierent operating regions. He admits that the country has much unexplored potential in deepwater, but that this has been a result of having very attractive opportunities in other regions. “I am sure that other companies from around the world would not be so advanced in deepwater exploration if they had enjoyed the same opportunities that Pemex did in shallow water,” he says. He goes on to explain that even though deepwater is now a priority for the company, it still needs to be balanced within the overall exploration portfolio, as Pemex has a lower success rate in deepwater exploration than it does in shallow water. “Even though we have 17 billion bbl of reserves in shallow water and 29 billion bbl of reserves in deepwater, we will continue to dedicate 60% of our budget to shallow water in order to keep our exploration portfolio balanced,” he says.