Geological Potential in the Gulf of MexicoWed, 01/18/2017 - 11:31
Q: What drove Spectrum to embark on its project with Schlumberger and PGS in Mexico?
A: We are a pure play multiclient company focused on developing frontier regions. We carry out geologic studies and planning of areas that are strategic and show potential. Spectrum focuses its design methodology on gathering available data, whether in the public domain or through an E&P company, to understand the geology before we begin the design process.
With this information we can create a proper design that tailors the data to the area. We have a large dataset of the US-side of the Eastern Gulf of Mexico, an area which is geologically similar to the Yucatan peninsula. That is what drove us to work in that region. We are working closely with the Ministry of Energy and CNH to promote the development of new geological plays to be included in the coming licensing rounds for this area. That is the core project we have with Schlumberger and PGS in Mexico. Schlumberger brought its extensive Mexican geologic knowledge to this partnership, it being a long-term player in Mexico, and PGS brought the vessels and processing expertise while Spectrum brought the permitting and design expertise.
We know that frontier regions are an underdeveloped area in Mexico, which may make it challenging at first to convince the government to include these areas in licensing rounds. Fortunately, we have talked with several E&P players and have received positive input from them because they are all looking to develop such areas in Mexico. We knew it was risky and that the areas would not be offered within the first couple of rounds but with a clear desire from the industry to have data there, the government would have to take it into account. That was our reasoning. We will have to work with PGS and Schlumberger to push and educate the government on the opportunities that exist but having the industry’s support will make everything easier. We are working on a petroleum modeling system with Schlumberger and PGS that will be available to the industry by the end of 2017, offering a fully tied petroleum systems model to the eastern part of the Gulf of Mexico.
Q: What potential do you see in the Gulf of Mexico?
A: The Mexican side of the Gulf of Mexico has many pre-salt areas that have never been tested but have the potential to be world class. We have identified and confirmed they are located in ultradeep waters, a fact that will encourage technological development in Mexico. The Mexican market is definitely allowing the entrance of many companies even though oil prices have dropped. Due to this fall in oil prices many companies have reduced their activities but thanks to the Mexican opening, they have found an opportunity to keep working and exploring new opportunities. They are also aware that once oil prices improve, the economics will improve together but they will have the tactical advantage of having operated for a longer time in Mexico.
Q: When would you consider Spectrum’s activities a success in Mexico?
A: We believe that our operations have already been a success in Mexico. We are holding positive business discussions with both the government and IOCs. In our industry, the rule of thumb is that success comes when your return of investment reaches a factor of 2.5, which we expect to achieve in the next three to four years. We also have the rights to sell the data for the next 12 years so we believe we are in a position to capitalize on the activity during that time period, which will greatly benefit our revenues and our business. It is hard to state the number of blocks that need to be awarded so we can claim success because it greatly depends on their size and attractiveness to the industry. In the meantime, because this industry takes time to develop, we are looking for new opportunities from the next rounds. We expect Mexico to have a continuous growth in our portfolio as it has world-class basins, so whether we will keep partnering or go it alone but either way we are going to continue growing in Mexico. Since our company is frontier-based and Mexico is a really underexplored country in this area, this is a great location for us.