Chicontepec: Not Yielding as Much Oil as Promised

Wed, 01/25/2012 - 16:44

The Chicontepec formation holds Mexico’s largest certified hydrocarbon reserves, containing more than 19 billion Boe in proved reserves, and over 139 billion Boe original oil in place. However, to date Chicontepec has not delivered on its potential to contribute substantially to Mexico’s production level because the oil has proven very hard to extract. If production can be raised at Chicontepec, it would be highly rewarding: the reservoirs at the field contain deposits of both light and super-light crude oil.

Located in east-central Mexico, with parts of the field in Veracruz, Hidalgo and Puebla, Chicontepec covers around 3,875km2. Pemex believes that in total there are between 29 different reservoirs composed of channel complexes flanked by and resting on lobe sandstones. Around half of the field consists of shales or silty shales with the remainder composed of thin sandstone beds. All the reservoirs have permeability of between 0.1 and 10 mD and porosity of between 5% and 15%.

The field’s geology has made exploitation extremely diffcult. Oil was first discovered at the field in 1926, but only in recent times has Chicontepec become a priority for Pemex. In 2006, President Vicente Fox announced a new investment plan to revitalize Chicontepec by investing US$37.5 billion over a 20-year period with the intention of boosting output to 1 million bbl/day. At the time, Pemex executives estimated that as many as 20,000 wells would need to be drilled in order to reach this production level.

However, the 1 million bbl/day production target was a long way off; output reached only 30,000 bbl/day by September 2009, though Pemex had spent around US$11.1 billion. The company established localized field labs in collaboration with some of the world’s leading oilfield service companies such as Halliburton, Baker Hughes, Schlumberger, Weatherford and Tecpetrol. The goal of these field labs was to focus investments in value creation, increasing the productivity of existing wells and bringing technical solutions to the challenging geology. The service companies would look at ways to redesign wells and infrastructure according to the local needs of each field lab.

Meanwhile, the newly created CNH stepped in to evaluate the project and deliver its judgement on Pemex’s actions thus far at Chicontepec. The news was not what Pemex chiefs wanted to hear, with Juan Carlos Zepeda Molina, President of the CNH, declaring after their review that, “the project should be stopped and reinstated when there is a real development plan.”

The CNH found that Pemex drilling a high number of wells with few tangible results was economically unviable, and told Pemex it was pursuing the Chicontepec project with only short-term production goals in mind rather than ensuring the optimal exploitation of the reserves. The CNH stated that Pemex was more focused on the operations side, and on developing strong drilling and completion capabilities. After a year and a half of operations, the NOC had drilled 2,000 wells, but many of these were not producing any oil. Despite this, Pemex continued to drill new wells.

The first CNH report in April 2010 was issued shortly after Pemex announced in a March 2010 conference call that it had started field labs to improve well productivity, among other things. However, rather than focusing on understanding the complex geology of the Chicontepec field, the regulator argued, Pemex had prioritised production targets and expended too much capital on these goals. The CNH report was written after consultation with geologists and geophysicists at the National University of Mexico. One of the main conclusions drawn was that development at Chicontepec should be refocused on technology developments - to create a better development plan for the region, and how to sustain production at wells that have already been drilled.

In reaction to the CNH criticism, Pemex scaled back its Chicontepec drilling and took a longer-term approach to the project. After looking at the work done so far in the field labs, the current approach to developing Chicontepec is to drill some horizontal wells and some vertical, as well as looking at slanted and multilateral drilling options.

According to CNH figures, Pemex drilled 794 wells in Chicontepec in 2009, but this figure declined in 2010 to 438 wells. In 2011, 322 drilled wells were added, which led to an increase in the average number of operating wells from 1,554 in 2010 to 2,029 in 2011. Output also improved over this time. January 2011 results showed Chicontepec producing at 44,700 bbl/day, but by the end of the year this had increased to 63,900 bbl/day.

Adán Ernesto Oviedo Pérez, Director General of Comesa, believes that Chicontepec is the most challenging project in the history of Pemex – he adds that he believes it to be even more of a challenge than Pemex’s move to deepwater. “Pemex’s main fields traditionally have had a large volume of oil concentrated in a small area. As long as wells were drilled in the right area, no matter if you had problems while drilling, the oil still flowed out. Chicontepec is very different: it is not carbonated, it is not a giant field, it is quite heterogeneous, its sand reservoirs are relatively small and have very low permeability, wells require hydraulic fracturing and pressure maintenance systems from the beginning, so Chicontepec is quite complicated; it’s a non-conventional reservoir and must be dealt with as a resource play,” he says.

Oviedo Pérez believes the priority for Pemex must be to understand the subsoil in better detail, from the distribution to the thickness of the reservoirs. He also believes that new seismic data is required to better map the reservoir complexity in order for Pemex to better define well locations. On the positive side, Oviedo Pérez believes that Pemex has now overcome its challenges understanding the best way to drill at Chicontepec