Discovery Sets Stage for Further Project Advances

Q: How have the consortium’s activities on Block 5 developed, following its oil and gas discovery in the Cholula-1 well?

A: Murphy is very excited about our discovery. Not only is this the company’s first exploration well in Mexico but it is also one of the first deepwater wells to be drilled by IOCs following the Energy Reform. While we are still evaluating the results, this discovery has de-risked the block and will lay the foundations for our future plans there. The seismic data we acquired has allowed us to perform an overall assessment of the block. We have identified upwards of 30 prospects and, with our Cholula-1 well proving the existence of a working hydrocarbons system, we are positive about the area’s overall potential. The drilling of the block’s Miocene amplitude play has de-risked a number of nearby prospects with similar characteristics.

Q: How has the relationship between the consortium partners evolved as developments on Block 5 have progressed?

A: We have had a good relationship with our partners. This  means the consortium has a collective view on how we pursue opportunities. We are delighted that our partners are also pleased with our work and we are all happy to see that our drilling has gone smoothly, efficiently and, most importantly, safely. Toward the end of 2018, our partner Ophir announced its intent to exit Mexico as part of a strategic shift and this included selling its interest in Block 5. In May 2019, we entered an agreement whereby the remaining partners will acquire Ophir’s interest. This is evidence of our commitment to the country.

Q: How will Murphy participate in the federal administration’s production target of 2.6MMb/d by 2024?

A: Murphy intends to pursue its project in Mexico. Our own targets are in line with the increased production push announced by the new administration. Despite having four years from the approval of our Exploration Plan in May 2018 to drill our commitment well, Murphy drilled the Cholula well within the first two years of signing the contract. We have put a great amount of effort into our Mexican block. At Murphy, we are very proud of our execution capabilities and have the track record to prove it. Therefore, we hope to reach production as quickly as possible. 

Q: What challenges does Mexican infrastructure face ahead of production in the Gulf of Mexico?

A: There is a considerable infrastructure gap between the Mexican and US sections of the Gulf of Mexico. While a discovery like Cholula would be very easily put on-stream in the US Gulf through a tie-back, this is not possible on the Mexican side. Murphy will be evaluating infrastructure around its block and will consider developing a greenfield facility by itself. If we have significant reserves and production to transport, an ideal scenario would be to bring in an FPSO to deliver the product directly to the market. 

Q: How has the arrival of the AMLO administration impacted Murphy’s activities in Mexico?

A: President López Obrador has stated clearly that he intends to respect contracts that have already been signed. Additionally, the president’s push for increased production has been positive for private players because it has put a focus on shortening approval periods and reducing the regulatory burden. This benefited Murphy during its preparation for the Cholula prospect as the regulatory bodies made an effort to ensure permits and approvals arrived on time. This change has also reflected in the updated exploration and development plan guidelines issued by CNH in April 2019, adding flexibility and shortening approval times for plans.

The suspension of bidding rounds and PEMEX's farmouts is unfortunate and we believe that clarity on future opportunities would be beneficial for the industry. It takes significant time and technical work to prepare for the bidding rounds so the government must consider this.

Murphy Oil Corporation is an oil and natural gas exploration and production company. Its resource base includes production from the US Gulf of Mexico, Canada and Southeast Asia.