Alberto Galvis
Citla Energy
View from the Top

Mixing with Majors Brings Optimism, Opportunity for Mexican E&Ps

Mon, 04/01/2019 - 18:14

Q: How is Citla developing its shallow water blocks – 7, 9 and 14 – won in Round 2.1, and Block 15 won in Round 3.1?
A: We have made significant progress in maturing opportunities in our blocks. Citla has, carried out seismic reprocessing to identify prospects and make them drillable targets. These studies, have confirmed our technical thesis regarding the potential existence of significant quantities of oil in a number of our known prospects. The company is now deciding where to drill the first wells from the options we have selected, although in Blocks 7 and 9, both located in Salina del Istmo, we have two commitment wells and already know where they will go.
We are working closely with our operators and are proud to be the only Mexican company to have partnered with an oil major, Eni. This fact highlights the commercial and technical capacity Citla provides. Our relationship with our partner exploration company, Cairn, is also very strong. The joint venture also has been progressing with the permitting processes, making sure the decisions, actions and surveying activities we have undertaken on the blocks are clearly stated, including environmental considerations. We have also undertaken environmental and social studies to identify any potentially sensitive areas in which local communities might be affected by our operations. These have all been passed on to the authorities. Exploration plans for Block 7 and Block 9 have already been approved; we are missing only the drilling permits, which we believe will be issued soon. By the end of summer 2019, we will be ready to drill in both blocks.
The development of Block 14, also located in the Salina del Istmo, is at an earlier stage and we must first identify the prospects here. But this block already has the advantage of a previous discovery – Xulum – that was not developed due to its size and heavy oil characteristics. Citla and its partner are trying to find more prospects in this area to convert the block into a commercial development. We will make a decision to drill or not by the end of 2019.
On the Tampico-Misantla Block 15, Citla did not make any drilling commitments, although we see definite geological potential here. But, while surveying, we saw a number of environmentally sensitive areas owing to its proximity to the coast and that the areas of greater prospectivity were on the eastern side of the block, away from the coast. Therefore, Citla and its partners took the decision to relinquish the environmentally sensitive, less prospective area, some 49 percent of its total size.
Q: How has Citla consolidated its position in Mexico following its successful bids and where has the company identified areas of growth?
A: We have plans to expand, although our current focus is on our four blocks, which cover an area of around 1,500km2. The blocks are a major commitment, contain multiple prospects and will demand substantial work. Although there is great room for development within our existing portfolio, CITLA continues to look for opportunities. Although the new bids have been suspended, we predict that the market will become more dynamic this year and into 2020, with M&A activity growing as the winners and losers of Round 2 begin to act. Those companies that have been successful will expand and consolidate while those that have endured difficulties may decide to sell to avoid the next commitment wells or risk further financial investment.
Q: How will the suspension of PEMEX farmouts impact the administration’s production target of 2.6MMb/d by the end of 2024?
A: The farmouts were a great opportunity to enhance PEMEX production and would have brought extra hands and expertise to aid what is a difficult endeavor for just one company. Farmouts could have supported secondary recovery rates and delivered gas and water injections to increase production levels. In the two farmouts that took place, PEMEX received sizable funds and the companies involved will now invest hundreds of millions of dollars that will lead to increased production from mature fields.