Alberto Galvis
CEO
Citla Energy
/
View from the Top

Key Operator Reschedules but does not Falter

By Pedro Alcalá | Mon, 03/22/2021 - 09:51

Q: How did the events of 2020 change Citla Energy’s vision regarding growth and development?

A: Our strategy focused on building a diversified portfolio in Mexico has remained intact, supported by our investors. We aim at pulling together a set of assets distributed across different stages of maturity, from exploration and appraisal to field development and production. 2020 provided challenges and obstacles to the entire industry, and we have been no exception, but these problems have not changed our strategy. However, our activity plans were adjusted following the initial well results coupled with the effects of COVID-19 and 2020’s extreme oil price environment. Some wells that we expected to drill in 2020/21 were rescheduled. Another relevant change was around the expansion plans of our portfolio. The suspension of new bidding rounds and tenders, including PEMEX’s farm-outs meant that such growth plans had to be equally adjusted.   

Q: What lessons did you learn from the three wells you drilled in blocks seven and nine?

A: We learned a lot from these wells. We modified the ranking of the remaining prospects according to new technical information. Each well drilled in the area helped us to further understand the regional geology in a province where few wells have been drilled, and information available is scarce. Through this process, we have significantly enriched our knowledge of this basin. 

Q: What synergies have you created with partners ENI and Cairn?

A: We are proud to have formed a partnership with exemplary companies such as ENI and Cairn. They have demonstrated an excellent array of skills and technical competencies in areas such as geological analysis and operations management. All their experiences in operations and activities in the world make it back to these blocks in the form of applied expertise. This expertise has played an important role when facing challenges in 2020.

Q: What is the drilling strategy for block 14?   

A: We continue to be very optimistic about block 14. The block already presents a discovery, so our studies are focused on demonstrating the commercial viability of that discovery and identifying additional prospects in this block that could potentially yield additional discoveries. Still a lot of work must be done before reaching a drill decision.

Q: To what degree did the events of 2020 determine whether a discovery or prospect is commercially viable or not?

A: I would argue that it changed very little. There is always the discussion around future oil prices, but history teaches us that it is always fluctuating, so it is best to plan conservatively. In addition, despite the accelerated energy transition, hydrocarbons will be needed for decades to come. In this sense, we still analyze the commercial viability of discoveries with the same eyes. Having said that, one element that has emerged in the south east region is the discovery of several mid-size fields, which creates the opportunity for integrated developments and hubs. Such type of opportunities can help reduce the minimum field size required for commercial viability.

Q: How would you say that supply chains have been rearranged in Mexico’s offshore landscape?

A: What always happens when prices drop significantly as they did last year is that the market contracts around a decrease in demand for goods and services. The supply for service providers remains the same, so prices plummet. These simple economic principles apply in the local Mexican market as well. You can take advantage of these competitive prices but the sustainability of the oil services sector in Mexico becomes harder to determine. Remember, this sector was already significantly affected and still recovering from the crisis it experienced in 2015 and 2016. We are concerned about the health of the sector, even though a critical point has admittedly not yet been reached. There is good supply of services and products of great quality at competitive prices.

Q: In 2019, Citla handed back 49 percent of block 15 due to environmental concerns. What have been the developments with the block since then?

A: The block percentage that was returned included sensitive ecosystems located near the shore, such as reefs and mangrove swamps. We remain satisfied with this decision, consistent with our principles around respect to the environment and communities. The process of returning this part is closed with the approval of the relevant authorities. We have had to demonstrate that the relinquished area was not affected by our activities. In fact, we have had to prove it is in the same state in which we originally received it.

 

Citla Energy is a Mexican E&P company with stakes in four shallow water blocks. The company combines local oil and gas industry expertise with financial backing for asset acquisition focused on onshore and offshore environments in Mexico.

Pedro Alcalá Pedro Alcalá Journalist and Industry Analyst