Kevin Macumber
Engineering Manager
Tellus Operating Group and Telpico
View from the Top

Flooding Expert Awaits Second Chance in Mexico

Wed, 01/20/2016 - 12:51

Q: What motivated Telpico to enter the Mexican market?

A: Tellus is the parent company of Tellus Operating Group (TOG), a domestic contract operator, which has an international affiliate called Telpico. We formed Telpico Mexico to register and participate in PEMEX’s early licensing rounds, and as far as we know, this was the only US independent company that participated in the integrated E&P contracts of 2011 and 2012, where we pursued full evaluations of four blocks, ultimately bidding on Tierra Blanca and San Andrés. Our main motivation came from the fact that Mexico has large fields with significant volumes of hydrocarbons that have been produced under a primary term but have not been exploited to their maximum potential. Given our expertise in secondary and tertiary recovery in the US, we saw an opportunity to develop these Mexican blocks. We looked at the first bidding round and decided not to rush into it due to some time constraints, but then we participated with R1-L02 and R1-L03. However, due to prices falling we withdrew slightly.

Tellus Energy is largely based on acquisitions of mature properties in Louisiana and Mississippi. One of the opportunities in this business plan was to enter into the secondary and tertiary recovery arena to extend the economic life of these assets. Therefore, our operating niche is achieving an increase of the recoverable oil in these reservoirs with onshore fields being our focus. As our business model evolved to maintain that growth, we realized we had to expand into other segments, such as exploration and stepping out to find opportunities internationally, which led us to Colombia and Mexico.

Q: What are some EOR processes that Tellus is developing or implementing that could be successful in helping Mexico increase production?

A: TOG is one of two operators east of the Mississippi river that are actively conducting CO2 floods in this state. We have a miscible gas flood that is being used in a large field in Clarke County, Mississippi, where we are using natural gas to maintain reservoir pressure so this does not drop to a critical level, which would result in liquid losses and would reduce the ultimate recovery factor from the reservoir. TOG currently has two CO2 projects it operates for Tellus Energy and is about to begin a third. One of these is a miscible 11,000-13,000ft CO2 flood in an older field, and the other involves injection of CO2 below 16,000ft for pressure maintenance in a newly discovered field. The third project will consist of an immiscible flood for a shallow 5,000ft reservoir, as opposed to a deeper flood in a miscible environment. There are analogues from other CO2 floods nearby that showcase the success and the ability to recover, in general, approximately another third of the oil in the location. We also operate a water flood and natural gas flood. Secondary and tertiary recovery is one of our strong areas and we saw a lack of that in some of the old fields in Mexico, so we thought about putting our expertise to work there to turn a profit for us and the country.

Q: How can you leverage on your expertise as an operator in the US to position yourself in Mexico?

A: The direct answer is our staff knows exactly what to look for in terms of efficiencies, or a lack thereof, in an old field. We know how to retrofit the field and determine whether to flood it with water, natural gas, nitrogen, or CO2, as well as analyze the infrastructure and the wellbore status. These are the main strengths we provide as operator.

We had a strong interest in Mexico with the first opportunities in the integrated E&P contracts, but we decided to take a step back due to the current price regime. However, the PEMEX farm-outs present an attractive opportunity for another avenue that could work for us. With the help of Roberto Carrillo, who advises Telpico in Mexico, we are keeping our eyes and ears to the ground awaiting PEMEX’s announcements regarding how it will offer up some of its fields and on the contractual and legal terms. As more opportunities present themselves in mature fields we fully intend to look at them, and if the contractual terms become more favorable to an operator like us, we will evaluate and see if we can find some low- hanging fruit that might work based on our successes in the US.