Arindam Bhattacharya
President of Mexico and Central America

ISCs Unlock Production Potential in Mature Fields

Wed, 01/22/2014 - 10:58

PEMEX made the decision a few years ago to award ISCs to private operators to obtain incremental production from mature fields that were either abandoned or producing well below their potential production. During the first contracting round of ISCs, three blocks in the south – Magallanes, Santuario, and Carrizo – were awarded, while six blocks in the north – Altamira, Pánuco, Tierra Blanca, San Andrés, Arenque, and Atún – were included in the second licensing round. The third round, which was completed last summer included six blocks in Chicontepec: Amatitlán, Soledad, Humapa, Miquetla, Miahuapan, and Pitepec.

“The success of the ISCs will depend on the generation of sustainable incremental production in the medium to long-term, which in turn depends on the quality of field evaluation and the subsequent field development plan,” says Arindam Bhattacharya, President of Mexico and Central America of Schlumberger. His company won one block in the south, Carrizo, and one in the north, Pánuco. According to Bhattacharya, the economic value of projects in mature fields is quite sensitive to the development choices. Therefore, one of the main risks of these models is that they might underestimate the complexity of the reservoir and production challenges. As a result, an insufficient tariff might be tendered to carry out the optimum development plan. In the end, this would prove lacking for the purposes of both PEMEX and the contract holder, since both aim to establish a win-win relationship where production is maximized and value is created for both parties. “We are still at an early stage of these contracts, the evaluation period is still underway,” he comments, while explaining that the start of operations at Carrizo has been delayed due to social concerns that PEMEX and Schlumberger are working to solve. “A lot of work is being done to address this issue by PEMEX and the local government. We are providing all the support that we can in the meantime, and we hope this situation can be resolved in the coming months so that the field development activity can begin,” says Bhattacharya. While the Carrizo situation remains yet to be solved, Pánuco is already at a late evaluation phase and, barring any obstacles, it is set to start production during 2014. “We have extensively studied the subsurface of this block and will start with workover operations at existing wells to generate short-term production and amass cash flow for the project. We are still analyzing the results from workovers and new wells, but, broadly speaking, our subsurface understanding of Pánuco has been validated,” says Bhattacharya. Schlumberger’s next objective is optimizing the field’s longterm recovery factor. “That really requires us to understand the reservoir dynamics downhole, the behavior of the fluids, and the nature of the hydrocarbon itself. This is particularly important in this heavy oil, fractured carbonate reservoir,” explains Bhattacharya. “We are running different technology pilots, and we have been very systematic with our technology selection for subsurface, drilling, completion, and production.” Bhattacharya stresses that the company is happy with the way things are progressing in Pánuco so far. “We are comfortable with our understanding of what is down there.”

Developing mature fields requires a combination of technical expertise, technology, and processes, as well as the capacity to integrate these within the context of the subsurface understanding. This is why Schlumberger decided to join forces with Petrofac for the Pánuco endeavor, aiming to benefit from the complementarities of both parties. “Schlumberger and Petrofac, partners in the Petro-SPM joint venture for the Pánuco field, complement each other very well,” Bhattacharya assesses. “Petrofac’s expertise in production operations and maintenance go well with our expertise in subsurface project management and well construction. We are collaborating and working together towards the same objectives, while remaining focused focus on what each company does better and learning from each other’s capabilities.”

Aside from Schlumberger’s joint venture with Petrofac, the company also has a relationship with Grupo Diavaz on the service supply side. “These are two different relationships with different commercial interests, they do not necessarily overlap. We complement Grupo Diavaz on the services side and have a joint venture focused on providing services to a multitude of customers,” explains Bhattacharya. While Grupo Diavaz deals with communities and the social aspects of operations, Schlumberger contributes international best practices and technological expertise. This joint venture could prove to be extremely helpful in starting up operations at Carrizo. 

Bhattacharya does not want to delve into the way ISCs might evolve into new commercial models, due to the fact that the country’s industry is in the midst of a reform process. However, he ascribes any contracting model’s success on two characteristics. “The new contracting models should focus on production and long-term recovery plans. The economic success of these projects depends on the field development decisions that are made, which in turn depend on the contractors’ understanding of the subsurface, production, and recovery mechanisms,” concludes Bhattacharya. “There is always a risk of under-appreciation of the field development complexity which may lead to a tariff that does not allow an optimum development.”