New Technologies Drive Trends in Onshore Development

Recent environmental and geopolitical events have led to a revival of interest in the exploration and exploitation of hydrocarbons, mainly natural gas. The increase in prices has renewed the attraction of investing in new projects to increase the supply of this key fuel, though oil remains an important resource too. However, the way of operating has changed, as sustainability and decarbonization in the industry must be prioritized. These objectives are reachable thanks to new technologies that are transforming trends for the development of onshore fields in Mexico and elsewhere.

"As operators and producers continue to seek greater efficiency and make their investments more profitable, they are looking to adopt cutting-edge technology trends that reduce production costs and the environmental impact while increasing safety and reliability," said Arianna Garcia, Business Development Manager, Servicios Integrales Nuevo Santander.

Trends both global and local influence the transformation of onshore operations. The global availability of hydrocarbons has been affected by the geopolitical events triggered by the Russian invasion of Ukraine. Gas has established itself as the base fuel of the energy transition and plays a central role in global decarbonization efforts. The reduction in its supply due to the Russian invasion of Ukraine has increased the need to diversify international gas supply sources. This impacts new onshore project development. 

"The price of a gas molecule and oil barrel is trending upward, which encourages national and private operators to develop exploration and production projects that perhaps were not attractive a couple of years ago," said Iván Galbán, Director of Sales and Business Development, Exterran.

In Mexico, a trend guiding the sector is the search for energy sovereignty as a pillar of the government’s policy. "In this quest for energy sovereignty, heavy investments are allocated to increase refining capacity and to grow domestic production of both oil and gas along with the infrastructure associated with this," said Galbán.

Mexico has large reserves of natural gas coming from unconventional sources in the north. These onshore reserves represent more than 60 percent of the 3P national natural gas reserves. However, the country currently imports around 70 percent of its gas from the US. However, the exploitation of unconventional onshore reserves requires heavy capital investments. The search for energy sovereignty, together with the increase in hydrocarbon prices, generates a favorable environment to attract the required funding and opens the door to the development of new onshore exploration and production projects in this region.

Another trend to consider is the appetite to invest in Mexico, which has slumped since 2014’s Energy Reform. ESG trends and a clear path to net zero carbon emissions will be favored by major financial institutions. Deloitte's survey, published in its Oil and Gas Outlook, shows that technologies such as Carbon Capture Utilization and Storage (CCUS) and hydrogen will help companies in the sector to stay competitive.

"One of the main allies in reducing emissions and implementing sustainable solutions is digitalization," explained Eugenio Cortina, Business Development Director Mexico, TechnipFMC. By automating processes and incorporating technology to monitor and operate onshore activities, operations in hydrocarbon fields are optimized, making them more efficient. This greater control over operations allows for better measurement of areas of opportunity, which in turn helps achieve the sustainability and decarbonization objectives that global trends demand. In addition, digitization and automation provide other benefits to operators, as it contributes to the reduction of CAPEX in the long term and maximizes their profitability.

"The country has significant oil and natural gas wealth that has not been tapped to its full potential," said Warren Levy, CEO, Jaguar Exploration and Production. In addition, the country's energy needs are only increasing. Despite this potential, Mexico presents several challenges, including difficulties to access capital on a global level.

"In Mexico, capital is not flowing as it should," explained Levy. Among the reasons for this is PEMEX's over-indebtedness. The bureaucracy surrounding paperwork and permits is also not helping to attract more investment, making it difficult to develop potential new onshore projects. "If Mexico fails to participate in this new oil boom, it runs the risk of being left behind in the generation of wealth and competitiveness in favor of greater welfare for its population," Levy said.

Part of the reason why the sector’s scarce capital is not opting for Mexico is the lack of investor confidence. This hinders the implementation of new technologies that would make onshore exploration and operation more efficient and profitable.

Another challenge hampering investment is regulation. Fiscally, the outlook has changed for hydrocarbons investments. This creates additional challenges for operators to implement projects quickly. Regulatory changes in favor of stronger measures against climate change demand that operators adapt quickly to the acquisition of new technologies. This would allow them to reduce the emission of polluting gases and optimize production. However, "the difficulty in accessing capital delays their ability to make the large investments that these implementations require," said José Bosch, General Manager, Oleum Energy.

Finally, the social impact of companies in the sector and their commitment to social responsibility is a growing trend. Part of the objectives of sustainability is to consolidate better operational dynamics that favor the well-being of the communities where they operate. "In addition to investing in technology to optimize operations and reduce polluting gases, operators must prioritize their social responsibility programs. Our operation must generate wellbeing in the communities where we stay," Bosch concluded.