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Analysis

MSCs Drive Diversification Rather than Gas Production

Tue, 01/22/2013 - 17:29

Part of Grupo Industrial Monclova (GIMSA), GPA Energy began working in the Burgos basin in 2007, at the Monclova block, under a multiple service contract (MSC) for Pemex. Over the course of the contract, the company worked hard to develop its expertise in the various segments surrounding gas production: from drilling and operating wells to planning and constructing gas pipelines to link the production infrastructure to Pemex’s natural gas network. However, according to Jesús Gil Benavides, COO of GIMSA, the project has not proven to be as successful as the group might have hoped, due to external factors: “Because of the current price of natural gas in Mexico, investment in expanding natural gas production in the Burgos basin has stopped. It is simply not profi table for Pemex to drill for dry gas, which is what we have in the Monclova block. Currently, the NOC is focusing on fi nding oil and condensates in the basin. As a result, our activities today are solely focused on maintaining the gas wells that we have in the block.”

GPA Energy was created as a joint venture between three companies, and served as a vehicle for GIMSA to gain the necessary expertise to become an operator for Pemex under the multiple service contracting system, which was put in place before the 2008 Energy Reform allowed for the introduction of integrated service contracts. Gil Benavides reveals that the company was formed after encouragement from Pemex to establish the fi rst 100% Mexican company operating under the multiple services contracting scheme in the Burgos Basin. “This is a turnkey project for us,” Gil Benavides says. “We drill wells and connect production to the pipeline network. We have 10 wells in operation, which reach a maximum of 100 mcf per month of production.”

Although the project has not met the commercial expectations, some positive results have come from the experience. As well as gaining drilling expertise, the company has also branched out into pipeline laying, and has been participating in tenders for the laying of various pipelines of up to 16” (40.64cm) in diameter. “The core competence for GIMSA is in manufacturing: we started building structures, o† shore platforms, and then we got into the gas business, which directed us to gas pipelines,” Gil Benavides says. With one of the largest pipeline trenching vehicles in the country, GPA is capable of laying as much as 1km of pipe per day. Also, the combination of the drilling experience in the Burgos Basin, and the group’s long track record in the construction of large steel structures, encouraged GIMSA to take a gamble on the construction of land rigs. “The fi rst land rig that we were going to build was destined for GPA, but drilling activities were shut down in the Monclova block as a result of the low natural gas prices. However, we are still looking to start that project,” says Gil Benavides.