Duo Ventures into Shallow WatersThu, 01/19/2017 - 12:44
Q: What was the significance of PetroBAL’s success in winning the Ichalkil and Pokoch blocks with Fieldwood in Round 1.2?
A: In our view Round 1.2 was the best round so far, from every angle. In fact, both Round 1.1 and 1.2 saw high-level bids from experienced companies such as Statoil, Sierra Oil & Gas, Talos Energy, Premier Oil, Eni and Renaissance. Looking at the bids, we were all more or less in the same range. Winning a block was a very exciting experience for us and the transparency with which CNH conducted the rounds made us feel secure about bidding. Some may think we should have submitted a lower bid in hindsight but the market set the bidding levels at the time. That was especially evident in Round 1.3, when the government bids were set at a much lower level than what the market offered in the end. Basically, we think the market is setting the bar for the bidding rounds.
Q: What made Fieldwood the right partner for PetroBAL?
A: Fieldwood is the largest private operator in the US Gulf of Mexico, with more than 600 production platforms. The Fieldwood management team has a long track record of operating for several companies so they bring a lot of experience to the table. Although PetroBAL has many experienced individuals, we lack the operational experience required by CNH for participation in the bidding rounds. Fieldwood has this experience, while PetroBAL has extensive geological knowledge of Mexico’s basins. These factors made our synergy with Fieldwood an excellent option.
Q: What surprised you the most about working with a private partner?
A: It did not surprise us because we view it like any other relationship. Our motto is: “we have to live with others.” We must endeavor to understand others and be prepared to compromise. Our relationship with Fieldwood has gone very well so far. We have talked out any differences and have come to an agreement every time. PetroBAL undoubtedly has more responsibilities and participation in geological and geophysical activities as well as evaluation and analysis plans. We also contribute a lot to the procurement process since we know the market conditions and suppliers very well.
Q: Are you planning to participate in Round Two?
A: We are definitely interested in the second phase of Round Two. Our final decision will be based on the conditions of each block and we will come to reasonable offers once we determine how attractive each one is. We must consider not only what the government asks of us but also what the market demands. PetroBAL’s strategy is to diversify its portfolio. Round 1.2 included proven reserves but Round 2.1 will be completely exploration based. We must assess the blocks in light of this information because the exploratory nature of the blocks will add more time to the project. There is no doubt that PetroBAL would be interested in partnering with PEMEX in a farm-out and we would most probably bid together with Fieldwood again.
Q: How can the authorities improve terms in the coming rounds and make things easier for interested companies?
A: We recognize that the government has to be careful when selecting the companies it allows to participate in each bidding round. From our point of view financial credentials are important. A company cannot invest US$50 million in a well without the proper knowledge and financial backing.
Q: What conditions should be set for possible partners with PEMEX to make a partnership more attractive?
A: There are three requisites for the successful development of any project: access to reserves, financial capabilities and the right people. A partnership between PEMEX and PetroBAL would be complementary, especially given our synergy with Fieldwood. The government’s stake could be an issue but it is the market that will decide this. The government does not act unilaterally when making decisions, instead it reacts to market demands.