CME, OPEX, PEMEX Join Forces to Develop Bacab, Lum Fields

To boost Mexico's production of liquid hydrocarbons in shallow and deep waters, PEMEX is partnering with private companies through financial and operating models aimed at reducing the NOC´s operational costs and public risk. 

One example is PEMEX´s recent US$1.650 billion agreement with CME Oil and Gas and Opex. The Comprehensive Services Exploration and Extraction Contract (CSIEE) is for the development of the Bacab and Lum fields. CSIEE contracts and farmout models have generated opportunities for private providers to continue supporting the development of the Mexican oil and gas industry, and according to experts, these will continue during President Claudia Sheinbaum’s administration.

The agreement aims at extending well depths in the Bacab and Lum fields, considered mature fields located 104km northeast of Ciudad del Carmen, Campeche, within the Ku-Maloob-Zaap reserve, in the shallow waters of the Gulf of Mexico. Over the next 15 years, CME Oil and Gas, a subsidiary of the Mexican business group CME, alongside Opex Perforadora and Perforadora Profesional Akal I, plans to invest a total US$1.65 billion to increase crude oil production by up to 10 times from these mature fields.

The investment will primarily focus on optimizing the productive profile of the existing wells and developing new wells, both productive and exploratory, due to the presence of adjacent plays within the perimeter of the same assignments.

The contract includes positive incentives for CME based on results from actual increases in production or project profitability. The Minimum Work Plan will contribute to an accelerated increase in crude oil production at Bacab and Lum, enhancing the total recovery factor.

The Plan includes:

• Drilling and completion of nine producing wells

• Drilling of two injector wells

• Two major workovers

• Procurement and installation of infrastructure to meet the production commitments established in the program

It is estimated that production will peak at more than 40Mb/d by mid-2028, approximately 10 times the current level.

The most important strategies of this project include the application of new technologies to implement well repair and drilling programs, as well as the installation of state-of-the-art artificial systems to enable early production under strict standards of operational excellence.

It is important to highlight that more than 10 national and international companies participated in the assignment process for this contract, which began in May 2023. Of the companies invited, eight showed interest, and only two met the technical, legal, and financial capacity required by PEMEX. After fulfilling all financial, technical, legal, and operational requirements, PEMEX awarded this contract to the consortium of Mexican companies led by CME.

Alfredo Miguel Bejos, chairman of the Board of Directors at CME, stated, “We are confident that the results will show that, if accompanied by the right technical and field management capabilities, the CSIEE contractual model is an effective formula to rapidly increase production in Mexico and take full advantage of the oil resources in mature fields that are part of PEMEX's reserves. CME and its subsidiaries have proved that it is possible to increase drilling time efficiency and lower average costs compared to industry benchmarks.”

CSIEE Model Reactivates Bacab/Lum and Lakach fields

In recent months, PEMEX reached two agreements to develop fields with private companies using the CSIEE model. This framework, derived from Article 9 of the Hydrocarbons Law, allows the state-owned company to partner with private investors to reduce risks and costs without relinquishing operational control or ownership of the reservoirs.

CME and OPEX’s CSIEE partnership with PEMEX to develop the Bacab and Lum fields is one of these examples. CME, in partnership with international allies such as the American firm SLB, will implement various innovative technologies to advance well drilling programs. The installation of state-of-the-art artificial systems is also planned to enable early production under strict operational excellence standards.

Currently, the mature Bacab and Lum fields produce 4 Mboe/d and have 3P reserves of up to 174.36 MMb. CME, through its subsidiaries, aims to increase the current production of Bacab and Lum tenfold through a multibillion-dollar investment of its own resources, focusing on optimizing the production profile of existing wells and developing new ones, both productive and exploratory, due to the presence of adjacent plays.

In the same manner, the CSIEE contract scheme enabled PEMEX and subsidiaries of Grupo Carso to reach an agreement for the exploitation of the deepwater natural gas field Lakach. This PEMEX assignment, located 90km from Veracruz, has yet to produce natural gas, despite the state-owned company investing over US$1.4 billion in its development for the drilling of up to eight wells, according to data from PEMEX and the National Hydrocarbons Commission (CNH).

To complete the development of Lakach, Grupo Carso has committed to PEMEX with a minimum work plan and an investment program that will reach US$1.88 billion. Lakach holds a reserve of 900Ncf of natural gas, and it is expected that, following this alliance, the field will commence gas production in 2026.

PEMEX’s Relationship With Private Players 

As the Sheinbaum administration prepares to address Mexico´s most pressing issues for the next six years, PEMEX continues to forge partnerships with private companies that are helping accelerate production in both shallow and deepwaters. These agreements are based on financial and operational models aimed at reducing costs and risks for the public company.

The CSIEE model is just one of the mechanisms that PEMEX is using to partner with private companies on hydrocarbon exploration and production projects, while remaining the operator and retaining ownership of the assets and reserves.

However, PEMEX has also pursued another scheme to partner with private companies through assignments stemming from tenders or oil rounds promoted by the National Hydrocarbons Commission (CNH) following the approval of the 2014 Energy Reform.

The projects for the development of the Lakach, Bacab-Lum, Trión, and Zama fields exemplify the partnerships that PEMEX has established with private companies to enhance production through advanced technologies, lower costs, and shared risks. These collaborations intensified in the second half of President Andrés Manuel López Obrador´s administration.

Each of these recently announced collaborations features specific characteristics and legal specifications. While the agreements between PEMEX and the Mexican business groups CME and Grupo Carso for the development of the Bacab and Lum fields, as well as Lakach, were reached through CSIEEs, PEMEX's partnerships with the Australian company Woodside and the American company Talos Energy to develop Trión and Zama resulted from tenders associated with the oil rounds promoted following the 2014 Energy Reform. These agreements take the shape of farmouts.

The Public-Private Partnerships in Trión and Zama 

To develop the Trión field, located in deepwaters off the coast of Tamaulipas, PEMEX partnered with the Australian company Woodside, which serves as the operator and will invest approximately US$4.8 billion in private resources to extract 479 MMboe.

Another case is Zama, a shallow-water field located off the coast of Tabasco. After years of litigation, PEMEX agreed to partner with the American company Talos Energy to develop this asset, which has reserves of 700MMboe. Talos Energy, a company in which businessman Carlos Slim also participates, is estimated to invest, along with PEMEX and its partners, over US$9 billion for the development of this field.

PEMEX Moves to Expand Private Partnerships 

In the coming years, considering PEMEX's liabilities and the financial restructuring focus that the administration of President-elect Sheinbaum will promote through the Ministry of Finance and Energy, led by Rogelio Ramírez de la O and Luz Elena González, it is likely that the company will continue to seek agreements with private firms to accelerate crude oil production using advanced technologies while minimizing time, costs, and financial and operational risks.

In its financial results report for the second quarter of 2024, PEMEX reported that its financial debt reached US$99.4 billion. While PEMEX indicated that its debt decreased by 1.8% compared to the end of 2023, the reality is that the state-owned company faces significant financial pressure from its creditors, which affects its liquidity for new exploration and production projects.

Therefore, strengthening and multiplying PEMEX's partnerships with private companies without compromising energy sovereignty will be a priority for the next federal administration, especially when multibillion-dollar investments are needed to develop fields that can counteract the natural decline of existing fields. This decline has already led to a decrease in production of 119Mb/d in the second quarter of 2024 compared to the same period last year, as liquid hydrocarbon extraction fell from 1.90MMb/d in 2023 to 1.78MMb/d in 2024.