News Article

Difference Between Drilling Program and Reality

Tue, 01/22/2013 - 15:36

Pemex’s diversification strategy and attempts to increase production hinge on the success of its drilling program. Each new well drilled has the potential to increase the amount produced per day, whether it be an exploration well to confirm the production potential of reserves, or development wells to best exploit the potential of a particular region. Onshore projects will play a major role in this strategy. In 2012, Pemex drilled a total of 1,296 wells, and completed 1,238 wells, the majority of which were development wells, and located onshore.

This represents an increase in the number of wells drilled year-on-year. In 2011, Pemex drilled 1,005 wells in total: 32 exploration wells and 973 development wells, in comparison to 2012, when Pemex drilled 36 exploration wells and 1,260 development wells. The difference between planned and actual wells drilled also looks similar. In 2011, Pemex planned to drill 32 exploration wells, and managed to stay on target during the year, drilling exactly the number of exploration wells planned; however, in 2012, while the company planned to drill 43 exploration wells, only 36 were drilled. In both years, Pemex drilled many more development wells than it had originally planned. In 2011, the actual number of development wells drilled was 973, compared to the 548 planned; in 2012, Pemex almost doubled the number of wells drilled when compared to its plan, from 677 to 1260.

The number of wells completed during this time also correlates with the number of wells drilled, and shows a level of consistency year-on-year. In 2011, Pemex completed 33 exploration wells, having planned to complete 34, and in 2012, it completed 37 wells, compared to the planned 44. In 2011, 1001 development wells were completed, once again higher than the planned number of 713, and in 2012, 1201 development wells were completed, again higher than the planned number of 789.

It is important to remember that the number of wells drilled is not on its own an indicator of success for an oil and gas company: those wells have to be productive and drilled with purpose. Indeed, Pemex has been criticized in the past for rushing into drilling wells without a sustainable plan in place for exploitation. This happened in 2010 with Chicontepec. Mexico’s upstream regulator, the CNH, published a report which criticized Pemex for drilling too quickly at Chicontepec, instead of trying to optimize production at its already-drilled wells at the project. Pemex says that it has now learned from past mistakes, and indeed, drilling at Chicontepec did decline following the publication of the report. From drilling 794 wells in 2009, by 2012 this number had dropped to 642 wells drilled. The increase in the number of unconventional wells, predominantly horizontal wells, and the growing use of casing drilling technology has increased the complexity of drilling activity and thereby resulted in a reduction of the number of wells drilled per rig at Chicontepec, which has gone from 19.9 in 2011 to 18 in 2012, despite increases in drilling efficiency.

Pemex officials often discuss the impact of rig availability on reaching drilling targets, but when comparing the 2012 plan with the results for the year, the company managed to reach and surpass its targets with the equipment available.