Q: What is your perspective on the results of the third round of ISCs?
A: We are still in the early stages and Chicontepec is obviously the single largest resource for the country. It holds nearly 90 billion barrels of oil and that number may well be revised upward. The question remains, how much of that is going to be recovered? There are some very promising signs that progress is being made, and in the context of the new legislation, technology, and capital investments have to be properly incentivized and proper risk-reward structures have to be in place. These structures should be applied in Chicontepec as well as in other parts of the Mexican asset base. Now, regardless of Chicontepec’s promise, it is clear that problems are yet to be resolved before capital can simply be injected and a production level of 500,000b/d can be reached. I am confident that level can be reached though, given time, as there has been a considerable amount of measurable progress compared to a year ago. These are very good signs, but progress must be accelerated for Chicontepec to take pride of place in PEMEX’s production future.
Q: What are the critical success factors to enable Chicontepec to reach its production potential?
A: First of all, Chicontepec is not just one universal mass. It has dozens of subsets, so a principle should be established that every subset of Chicontepec requires its own subset of expertise. Elements that take place in one segment are not necessarily transferable to another. That realization is starting to sink in, more efforts need to be dedicated to understanding the innate nature of the rock and the challenges associated with the extraction process. You cannot cut corners. This is the most important resource play for PEMEX; it needs to dedicate the appropriate capital, human resources, infrastructure, and long-term thinking to the development of this asset. This strategy will involve decades of work and billions of dollars; it is going to require very elaborate and very sophisticated thinking and planning.
Q: What should be the respective roles of the public and private sector in unlocking Chicontepec’s potential?
A: Complex problems require complex solutions, and no single party could unlock all of the secrets. We should look at the way the US unlocked unconventional resources, particularly the shale plays in both oil and gas. The most important breakthroughs were not made by the largest research facilities, service companies, or oil companies. The most important breakthroughs came from independents and from one person in particular: George Mitchell, who passed away last year. The success of the independents in the American model, which brings out the best of the free market system in terms of risk-taking and the agility in moving capital, technology and human resources, is transferable to Chicontepec. Mirroring this, many more companies should take to the field as adequate risk-reward structures are put in place. The best will rise to the top and the best solutions will be created. A new technological investment paradigm is necessary.
Q: What should be the overall role of recovery rates in this new technological investment paradigm?
A: The whole idea of increasing recovery goes to the heart of better reservoir management, since the goal is to come up with smarter and better ways of extracting oil. Historically, the industry has only recovered around 30-35% of the oil from reservoirs. There are no reasons why we cannot achieve a recovery rate exceeding 50%. In some countries such as Saudi Arabia, 70% has been adopted as the standard target. That is a very quick perspective as to what the opportunities are. It all comes down to applying modern techniques of reservoir management, which is at the heart of IOR.
Q: What are QRI’s most important growth ambitions in Mexico for the coming years?
A: Our number one goal is to become Mexico’s most trusted advisor in strategic thinking and technologies. Under that umbrella, there are so many possibilities. We are already working already in two regions: the South Region and Southwest Marine Region. Our goal is to operate in all four regions, especially the North Region. Chicontepec represents a high-value creation platform for QRI working side-by-side with Mexican enterprises. By the same token, the Southwest Marine Region has tremendous assets, and we want to work with the Mexican administration on all levels to formulate the best path forward in capturing the true potential of the country’s natural resources.