Bringing Shale into the LightWed, 01/18/2017 - 13:51
While the rest of North America has increasingly turned to the development of unconventional resources to increase national oil production, Mexico’s shale potential has yet to be realized. Despite preliminary indications that the country holds a rich unconventional resource, efforts to commercialize shale in Mexico is in its infancy.
Canadian operator Renaissance Oil has been evaluating Mexico’s shale resources for several years. After achieving a huge success in the mature, onshore Round 1.3 auction, Renaissance has turned its attention back to the potential “gold mine” in Mexico that is shale development. “Our strategy has been from the start and is still is to focus on both reviving mature fields and developing shale resources,” says company Vice President of Business Development Kevin Smith.
The company, formed in 2013 to take advantage of the Mexican Energy Reform, carried this tunnel vision over to Round 1.3, when it took home four of the 25 onshore blocks up for grabs — more than any other participant and securing a bulk of the production from the auction. Now, after adding a partnership with Lukoil to its growing Mexican portfolio in 2017, it has operations in five fields across Mexico. The alliance with Lukoil makes Renaissance a partner for the oil Major’s operations in the Amatitlán block near Poza Rica in Veracruz. The transaction, valued at US$1.75 million, saw Renaissance acquire an indirect 25 percent interest from Marak, Lukoil’s previous partner on the Chicontepec block.
Described as a “game changer” for Renaissance, Smith attributes the success to a few factors, citing the young operator’s rapidly expanding experience in Mexico as a competitive advantage uncommon in the industry due to the market’s new status. “Lukoil is a huge and successful company that produces over 2 million b/d of crude oil,” he says. “Renaissance’s Mexico focused operations team was an excellent complement to Lukoil’s global capabilities. The partnership significantly enhances the execution ability to achieve the goals agreed on with PEMEX.”
Keeping in mind Renaissance’s focus on mature fields with shale potential, the Amatitlán venture with Lukoil fits the bill. Since its discovery in 1962, the block’s oil production reached a peak of 650b/d in 2005, a number that has since dwindled to negligible volumes due to a lack of drilling activity. Hoping to turn this around, and tap into the blocks’ estimated multi-billion barrels of oil and trillions of cubic feet of natural gas in place, Smith says Renaissance will mobilize its internationally acquired knowledge for the venture.
“Our technical team is especially knowledgeable in conventional and unconventional resource development,” he says. “They bring a unique understanding of rock characteristics, drilling and completion techniques to ensure the successful development of projects in shale and mature fields reinvigoration.” The program will include workovers of existing wells, the drilling of new wells in the shallower Chicontepec formation and, most exciting according to Smith, the drilling of a deeper well targeting the Upper Jurassic shale formations.
The same international knowledge and experience is being leveraged to develop the four blocks Renaissance won in 2015 in Round 1.3, says Smith. Learning CNH’s new process for the administration of the Mundo Nuevo, Malva and Topen blocks, all located within 61km of Villahermosa in Tabasco, as well as the Ponton block in Veracruz, provided the firm with its greatest challenge to date. “We are one of the first companies to experience the new system,” Smith says, “but we are happy to accept the challenge because we are all learning and can see our feedback is shaping the industry.”
The company’s exclusive focus on Mexico’s opening oil and gas market certainly brings challenges but also offers Renaissance’s investors a unique opportunity. In Smith’s eyes, the firm offers its stakeholders the chance to direct their capital specifically to Mexico, which is a unique opportunity globally. As a small and aggressively growing company, Renaissance offers investors transparency as to where their investment is going. “We can minimize investors’ unsolved questions and therefore enable a faster and more efficient capital investment, which in return brings faster transactions and strategic advantages.”