Eni Authorized to Develop Shallow-Water Project in Veracruz

The National Hydrocarbons Commission (CNH) approved a 2022 working plan of the Italian IOC Eni, which includes two contracts for shallow-water exploration off the coast of Coatzacoalcos, Veracruz.

At the end of May 2022, CNH first authorized an amendment to an exploration plan presented by Eni, which was included in the contract CNH-R03-L01-G-CS-01/2018. The contract area covers 807km², with water depths between 70 and 600m. Originally, the IOC had set aside a budget ranging from US$116.28 to US$128.52 million.

In June 2022, the Italian company made progress in the development of this project and revealed that it will serve as the operator of both contractual areas, which will function under a joint-production modality. The contract area A7.CS constitutes a 590.75km² area.

Eni said that it would reduce investment in this project, going down from a minimum of US$48 million to a minimum of US$39.5 million. According to Oil and Gas Magazine, the company would allocate 84.5 percent of the investment to oil well drilling, 9.2 percent to general expenses, 5.9 percent to ensure safety procedures and environmental guidelines and 0.4 percent to geological analysis.

As for the neighboring area CS-01 contract, Eni confirmed it will also invest less for exploration than previously planned, between US$33.9 and US$34.7 million. Eni allocated 89.09 percent to oil well drilling, 8.36 to general expenses, 1.82 to safety and environmentally minded procedures and 0.74 percent to geological analyses.

Eni recently experienced one of its most unproductive periods since it started its Mexican operations in June 2019. According to CNH’s data, the company’s February 2022 production stood at 9.4Mboe/d, which amounts to a monthly decrease of 3.2 percent compared to January of this year. Issues regarding an export permit added to the challenges.

Bloomberg reported that Eni had been struggling with pressure level hurdles, which resulted in gas production levels increasing but oil production decreasing. Moreover, the Italian company was hit by this negative streak amidst a general upturn in private oil extraction in Mexico, which produced an annual increase of 53 percent in April 2022. Eni’s setbacks meant that even though it could up its production to 18.8Mboe/d in March 2022, it could not sustain this in April 2022. That month, the company was only able to extract 14MBoe/d, which meant a decrease of 25 percent compared to March.

Nevertheless, the progress achieved by Eni is considered to be a benefit for Mexico’s private oil production. With the exploration contracts, Eni could have the opportunity to diversify production from Mizton, its flagship field, thereby strengthening its Mexican portfolio.