The Evolution of an Independent Operator in Trying Times
STORY INLINE POST
Q: What would you highlight as the most important aspects of your 2021 operational balance and results?
A: Our 2021 results were good, especially because we recovered some of our production levels. Oleum faced some operational issues halfway through the year but we recovered toward 4Q21. In that sense, 2021 was a year defined by key operational challenges that we eventually overcame successfully. It was a bit of a strange year. We were dealing with operational conditions that seemed to be between the pandemic and its supposed ending, which never came about. Our regulatory compliance was a success in both legal and contractual terms. Owing to our strong finish, the year ended up being a positive experience. At the same time, the regulators exhibited a remarkable responsiveness to our needs and concerns. Our communication with them expanded and became more efficient throughout the year, as they proved to be flexible in their response to the variable circumstances caused by COVID-19. This benefited the industry by generating legal certainty.
Q: How would Oleum describe the most important aspects of its planned investment of US$8 million in Mexican fields?
A: Our evaluation plan already contemplated possible expansions that were approved by CNH. This included the resolution of issues with landowners from fields that were part of our contractual assignments. These issues created temporary blockages in access to the fields, which needed to be resolved swiftly if well evaluations were to be completed on time. Some of these had to be delayed but CNH understood our situation and allowed us to adapt to these circumstances. We completed all our contractual minimum work goals and even surpassed them by 50 percent regarding work and investment. We achieved this throughout the elaboration of our final evaluation plan, which needed to include these delayed well evaluations. By January 2022, we finally evaluated the remaining well, since our legal unit had successfully negotiated access with the landowner in question. This led us to submit our transition plan to CNH, which contemplated more than US$8 million in investment, and it was approved in February 2022. The work and investment plan will enable Oleum to increase production levels at its fields by over 30 percent throughout the year.
Furthermore, one CNH commissioner publicly congratulated Oleum Energy for its rigorous compliance regarding all regulatory and technical requirements during the approval process. While the approved transition plan makes this year’s schedule perfectly clear, the company is also busy with the elaboration of its field development plans, which also need to be presented in 2022, likely by the end of April. These field development plans must be accompanied by substantially more detailed investment and financing arrangements that can support the aggressiveness of our field development ambitions. Therefore, we can expect much of our future in Mexico to be delineated by the end of 2022.
Q: What are Oleum’s most important success factors when it comes to its negotiations with landowners?
A: It is important to approach this less as an issue to be resolved and more as a requirement to be fulfilled. As operators, we must prepare for the scenario that our acquisition of the required complete social license will take as much time and work as necessary. Companies must define and address social needs regardless of how much negotiation will be required. Therefore, a key success factor was seeing this process in terms of how we could fulfill the social needs of the communities we were working with, rather than how we could solve this as a problem that only affected our interests. Acquiring this social license is essential and we work closely with all landowners to ensure that we can accomplish this task. The company has an optimal relationship with the landowners it works with, having established a wide-open communication channel and a solid base of mutual understanding, as well as agreed-upon expectations. We successfully negotiated all their petitions to make sure that they all resulted in mutual benefits.
Oleum Energy is an E&P company founded by Mexican entrepreneurs to explore, develop and operate oil and gas fields in North and Latin America. It is actively involved in the identification of investment opportunities all along the energy chain value in the energy sector.