Carlos Morales Gil
Director General
PEMEX E&P
Gustavo Hernández
Gustavo Hernández
Subdirector of Planning and Evaluation
Pemex E&P
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Insight

Exploration Success in 2012

Sun, 01/22/2012 - 09:15

For decades, Pemex did not focus on exploration due to the vast reserves available in fields such as Cantarell, KuMaloob-Zaap, and Chicontepec, and the lack of a su·cient exploration investment budget. But, as all good things come to an end, the decline of Cantarell, starting in December 2003, at 2.211 million b/d, brought pressure upon the NOC to adapt its exploration strategy and appoint the necessary budget to develop it. However, as José Antonio Escalera Alcocer, Subdirector of Exploration at Pemex E&P explains, “it was not until President Felipe Calderón’s term that this task was prioritized again.”

While the 1990s might have been a lost decade in terms of oil discoveries and expansion of the country’s reserves, the relevance of exploration started to regain strength in the period from 2000-2006, with the presidency of Vicente Fox. Proven oil reserves declined from 45.3 billion bbl of oil in 1990 to 10 billion bbl of oil in 2012, and resultingly Pemex faced the urgent need to engage in a more systematic and organized exploration campaign, and to adopt a diversification strategy that would allow the company to explore in onshore, shallow water, and deepwater regions. This strategy implemented in 2006, has been the main driver for Pemex exploration activities since, and has led the NOC to spend its budget across several di†erent targets that will yield production at di†erent moments in the coming years. With an increased enphasis on exploration going forwards and an expanded budget to achieve its goals – it increased from US$2.80 billion spent from 1994-2000, to US$9.60 billion from 2000-2006, and US$14.88 billion spent from 2006-2012 – the mission to incorporate new reserves was set in motion. “These numbers demonstrate Pemex’s ongoing focus on finding new hydrocarbon resources in Mexico, as a means to continue being energy sustainable and recapture a positive oil production trend,” Escalera Alcocer says.

Nevertheless, Adán Ernesto Oviedo Pérez, Director General of Comesa, argues that “Pemex needs to improve its budget allocation. Only 15% of last year’s total investment was dedicated to exploration, but to capitalize on the conventional opportunities that still exist onshore and in shallow waters, Pemex needs to, at least, double its exploration budget.” Escalera Alcocer emphasizes that “Pemex must never neglect onshore and shallow water exploration. These projects represent short and mid-term impact, while deepwater is focused on the long-term prospects for the country.” Pemex’s numerous achievements in shallow water and onshore exploration vouch for Escalera Alcocer’s remarks. “After 15 years of pursuing exploration projects within Tabasco, we finally prevailed by discovering super-light oil (45°API) at wells drilled in the Navegante field, which was a real accomplishment due to the complicated technical challenges that it presented – high temperatures and high pressure – but also because of the environmental and social issues that the area presented,” Oviedo Pérez states. The Navegante project was a geologically challenging endeavor for Pemex due to the complexity of Navegante-1, its first well. The area required cutting-edge seismic technologies and sophisticated equipment for drilling, which took longer than expected due to the underground saline layer where the hydrocarbons were located. “We could not fully evaluate the hydrocarbon column at first,” Escalera Alcocer describes. “We could just see the top 320m, while another 300m of the column were left unseen.” The success of Navegante confirms the validity of ongoing e†orts by Pemex to maintain diverse sources for reserves. “Investments are still being made in onshore Veracruz and Tabasco and the rest of the Cuencas del Sureste area to acquire new seismic data with innovative and complicated technology and survey designs,” Oviedo Pérez explains. “We have already been able to provide Pemex with better images of the subsurface, in order to define both the top and base of the salt and, through its interpretation, try to define a better geological model and select the right place to locate the next opportunity over there.”

The development of Tsimin-Xux has also been a successful project during 2012; after confirming 239.3 million bbl of 1P reserves during August 2011, it only took one year for Pemex to successfully start early production in the field. This is an additional production source that is already accounted for in the favorable trend that Pemex wants to follow. “With the new type of discoveries that we have made, such as Ayatsil and Tsimin, it is important to define reservoir behavior, and in the end, that is purely the role of exploration. Investment in these fields should be focused on development, appraisal, and on establishing the commercial size of the discovery,” Oviedo Pérez says. “On the other side, additional exploration projects also have to be pursued: Tampico Misantla, prospective shale oil and gas resources, and deepwater exploration have to be e·ciently taken care of in the interests of propagating commercial exploration success towards the future.”

Whilst the NOC has gained expertise in shallow water and onshore operations, it still had to strengthen its abilities in extended water depths before actually committing to drilling in deepwater. At first, Pemex decided to focus its investments on acquiring as much 2D and 3D seismic information as possible for the more than 500,000 km2 deepwater area. “Through geological surveying, Pemex managed to update its intelligence on prospective areas where commercial hydrocarbons might be found in the mid and long term,” Escalera Alcocer stresses.

2012 can probably be regarded as a breakthrough on Pemex’s ongoing deepwater endeavor. The final months of the year saw e†orts paid o†, as two deepwater wells were drilled where light crude oil was discovered: Trion-1 and Supremus-1. “Deepwater represented high-risk, highprofitability projects for Pemex,” Carlos Morales Gil, Director General of Pemex E&P, describes. “That makes them longterm projects that require big flexibility ranges.”

Morales Gil, Director General of Pemex E&P, says that the plan had not been to drill Trion and Supremus first, but that they ended up being an unmatched learning experience. “We had marked Maximino as our first geological longterm prospect, ever since getting its seismic results back,” he explains. “Maximino and PEP were our original bets for deepwater. We switched to Trion and Supremus because they were faster wells to drill and they would give us a better idea of what to expect in the rest of the Perdido projects,” adds Gustavo Hernández García, Subdirector of Planning and Evaluation at Pemex E&P. The success at Trion and Supremus has raised the expectations for future deepwater discoveries, despite persisting doubts about Pemex’s decision to allocate time and resources to explore the Perdido area a few years before. “Deepwater is an exciting opportunity,” Oviedo Pérez says. “With a 55% commercial success rate in deepwater exploration wells, Pemex has done an incredible job.” By the end of 2012, Pemex had already committed US$1.12 billion out of the US$2.64 billion available for deepwater – which was around 40% of the entire deepwater budget for the year – in three additional drilling operations.

While technology and training have been important factors in Pemex’s exploration success during 2012, Escalera Alcocer believes that the flexibility of the NOC’s exploration team to acquire those technologies and combine them with their experience has been the tipping point for progress in exploration. “Exploration, as other activities within the value chain, requires great amounts of experience. Its profile consists of a mixture of geoscientists that study the field’s characteristics and artists that interpret them into usable knowledge that cannot be acquired through memorizing,” Escalera Alcocer explains. “The exploration team uses that knowledge to understand what happened within nature over the past billion years and predict where commerciallyextractable hydrocarbons rest in the earth’s geology.”

Pemex has addressed even the harshest criticism, by delivering on challenging projects, exceeding a 100% reserve replacement rate, and constructing a stable production curve for the future. The role of exploration will continue to be critical in the prolongation of this success, and, as Escalera points out, it has all originated from careful planning and continuity. “Today, after all the experience we have amassed in the years, we have greater clarity on where the potential for important resources lies in Mexico,” he adds. “This has convinced our authorities and the society to invest in exploration and not rest in their laurels, depending on the country’s proved reserves.”