Horizons Expanding in Offshore Licensing RoundsWed, 01/18/2017 - 12:57
Q: What are the highlights of Sierra Oil & Gas' upstream activities in the past year?
A: Sierra has become an important player in the offshore area. We consider it to be a major achievement because we have managed to become number one in terms of blocks assigned and net acreage. This has given us a level of maturity and recognition in Mexico and across the industry.
Q: What were your initial concerns after winning two blocks in the shallow-water Round 1.1?
A: After winning blocks two and seven in Round 1.1 Sierra immediately started performing environmental baseline work, seismic reprocessing and overall preparations to drill. Now we expect to start drilling the first exploration well in the country, which is an important step for Sierra, its partners and Mexico.
Sierra bid on Block Seven because it saw several strong prospects with the right quality. These prospects have even been categorized by consulting companies such as Wood Mackenzie as being among the top 10 global prospects in the oil and gas industry and I believe among the top five for oil alone. We will start drilling Block Seven in May 2017 with a semi-submergible rig that worked the US side of the Gulf of Mexico. We will start drilling a vertical well to hit two targets. First results should be available by July or August.
Block 2 is also pretty exciting. Although all our efforts and energy are focused momentarily on Block Seven, we will finish the Authority for Expenditure (AFE) for Block 2 by the third quarter, with the hope of being ready to start operations six months later.
Q: What is Sierra’s role in the consortium with Murphy and Petronas that won a deepwater block in Round 1.4?
A: Everybody in the partnership contributed but Sierra’s strengths focused on commercial, technical and legal expertise. Specifically, Sierra offered an important source of regional knowledge to the group thanks to our dataset covering over 60,000km2 of 3D seismic, which we believe was one of the decisive factors that allowed us to win Block Five. Sierra also had the advantage of knowing how the regulatory processes and economics work in Mexico, therefore having the ability to offer our partners insight into how to work on their own processes. We see ourselves as an early stage developer, screener and technical partner and now that operations are about to start, Sierra can have a more supportive role, helping partners get established in Mexico by providing experience and assistance.
Q: What are your thoughts about local content in the oil and gas industry?
A: It is hard to talk about local content in the exploration sector. Having only one shot to drill a well, investors want to make sure they have the security of working with the very best international and local companies using the latest technology and equipment.
Local content is easier to implement in the production phase than the exploration phase, where activities are more repetitive. Having said this, we will exceed the local content required by the contracts by 15 percent.
Sierra is aware of the harsh conditions local companies have been exposed to because of PEMEX’s budget. At the same time Mexico has become a very competitive environment. Sierra Oil & Gas and its partners ran a tender for environmental studies for Block 7 and 2, inviting local and international players but sadly, prices from local companies were three times higher than those from international companies. To solve this issue local content needs to be more proactive, ensuring it can compete both in quality and price against international companies and most importantly, make sure to promote itself because most companies are not aware of the multitude of service companies that are present in Mexico.