CNH Review of Exploration Activities

Q: What do you think are the main lessons Pemex has learned in the last years regarding deepwater exploration and drilling, and how has Pemex improved its drilling and exploration programs, plans, and safety measures?

A: The area where we have progressed the most, without a doubt, is deepwater. I can comfortably say this because Pemex has to provide its drilling programs to the CNH, including an overview of the planned security measures, processes, certifi cations, and qualifi cations and capacities of Pemex personnel. Based on the programs we have reviewed Maximino, Supremus, Trion, and PEP, and we are satisfi ed to say that Pemex has been progressing steadily in this area. However, progress has not been easy. In 2010 Pemex’s capacity to drill wells was below the current level because the company did not have the necessary security measures in place. For example, companies in the US and the rest of the world hire various insurance companies as a means to back their drilling operations in case of accidents, but Pemex did not have any insurance. Currently, even though it was not easy to acquire, Pemex has a contract in place with Wild Well Control. Some issues like this are making Pemex a good player in the exploration of deepwater resources.

Q: What are the main improvements that you would like to see in the exploration strategy of Pemex?

A: In our case, the CNH is responsible for regulation, and therefore, we are not involved in the creation and execution of Pemex’s exploration strategy. Despite the exploration success during 2010-2012, I believe that the country needs a well-defi ned exploration strategy oriented to deliver new resources and to increase production, creating substantial value to Pemex and the country. In this sense, it is very important to prioritize all the resources to defi ne the best options to maximize the value of the exploration portfolio. Currently, it seems that we are drilling in various locations, without a clear program or logical plan. No one reallyknows, or explains to us, if we are drilling in new locations because they are close to existing infrastructure or recent discoveries, or because these locations are cheaper than other places, or whether we are looking for gas or oil. We need a clear and logical national strategic plan to create value to the country. Also, it could be important to develop new options in the strategy in order to create value based on our superior gas position, including shale gas and shale oil developments.

Q: Another important discovery was Navegante, located in a new geological layer in onshore Tabasco. What does this discovery mean for the future of onshore exploration in that region?

A: Navegante has been an important onshore exploration success story. Therefore Pemex will continue exploring and drilling new wells using frontier reservoir exploration, which means exploring and drilling new wells in the vicinity of existing ones to fi nd new potential reserves or reservoirs that are geologically connected to existing fi elds. I believe that this is a great exploration strategy for onshore areas in Tabasco because most of the fi elds in the region have similar geological characteristics, allowing Pemex to optimize the use of technology and infrastructure while not having to invest in new equipment, research, and development of these fi elds. The discovery of Navegante is of great importance because it has taken Pemex into a new era of frontier reservoir exploration in onshore and shallow water regions.

Q. What is your perspective on Pemex’s exploration priorities in 2013?

A: Exploration e† orts in Mexico are focused on onshore, shallow water, deepwater, shale gas, and shale oil resources, to reduce the risk associated with exploratory activities. I am truly surprised that Pemex has not started to delineate the large reservoirs that have been found in deepwater – such as Maximino, Supremus, Trion, and PEP – and that they are continuing to drill new deepwater exploration wells. Regarding the myth that has been circulating that Pemex is trying to fi nd as much oil and gas in deepwater, before a comprehensive energy reform is passed, as a means to have a portfolio of opportunities to o† er to potential partners in future deepwater activities. I believe that it is more related to a general program developed some time ago that needs to be improved in order to create value and to provide production in the short term. Therefore, the most interesting exploration activity is in the Southeastern Basins. These basins have contributed with the largest volumes of new reserves; a good option is to locate new reserves in shallow water, reservoirs of the Mesozoic, because this basin mainly produces light oil, and Pemex has all the experience, technology, and infrastructure to develop this resources.