One Small Step for Sierra, One Giant Leap for MexicoWed, 01/20/2016 - 16:32
The consortium formed by Sierra Oil & Gas (Sierra), Talos Energy, and Premier Oil emerged as the only winner of R1- L01, being awarded Blocks 2 and 7. When it comes to the proceeds of this tender, Iván Sandrea, CEO of Sierra Oil & Gas has only praises. “The bidding process was excellent. It was transparent and efficiently run,” he reports. He is also reassured in the choice of the consortium to bid on Block 7, as the amount of interest it attracted from worldclass bidders corroborates its appeal. Sierra’s analysis had revealed that the two blocks won by the consortium were particularly promising in terms of resource materiality, standing out from the rest of the blocks offered in R1-L01. Sandrea believes that the bids placed by other companies were a powerful validator for Sierra’s geological analysis and business strategy.
Despite the many complaints lodged by operators regarding the running of the R1-L01 tendering process, Sierra saw a considerable opportunity. “We were certainly not alone,” Sandrea explains, “even despite the contractual framework that had been established at the moment. Statoil, ENI, and Hunt, all world-class companies, competed with us for the opportunity. Undeterred by concerns regarding the contract’s administrative burdens and CNH’s levels of involvement, Sierra, along with its partners, bid for blocks in R1-L01, and it is now convinced that our analysis proved to be correct. Moreover, all initial angst concerning CNH has dissipated as it has proven to be an extremely professional and efficient agency.” When it comes to Sierra’s own bid, the CEO rests assured that the results were as positive as Sierra could have hoped for. “Not only did we emerge as the winners, but we did so by placing a well-balanced bid, without either under- or over-bidding, which has been of concern in other bidding rounds,” he remarks. In his opinion, success was achieved thanks to science-based decision making, as well as the group’s strengths. “While most companies adopted a conservative stance and decided to wait for later bidding rounds, we trusted our deep understanding of the Mexican landscape and bid for a couple of blocks.”
“Our group’s strengths stem from its collectively accumulated years of experience working with world-class companies. Despite some similarities, we are all different companies,” the CEO clarifies. He explains that Talos Energy has a remarkable exploratory track record on the US-side of the Gulf of Mexico, where it has focused all its efforts so far. “It is an efficient, well-run company, and perhaps the one with the lowest average production costs among the companies that have currently been awarded an exploration or production block in Mexico. It excels in bringing discoveries into production in a fast, inexpensive, and responsible way,” he applauds. Premier Oil, on the other hand, is a 90-yearold independent with a global portfolio. It boasts the most extensive experience of the three, and, despite its larger scale, Sandrea emphasizes that it is also efficient and fastpaced. Sierra, in turn, has a strong and talented team that was hand-picked to ensure its specific focus on Mexico. “We are a young company,” he admits, “but we are certainly not new to Mexico or the oil and gas industry.” The company’s role in the consortium will be to focus on the Mexicospecific aspects of the project, be it geology, commercial understanding, or regulatory interpretation.
After winning and signing the contract, Sierra started working on a new plan for the short and long term using 32 Terabytes of high quality data. So far, the company has conducted an amplitude velocity analysis (AVO) on the data on the seismic surveys. “This is helping us identify and calibrate direct hydrocarbon indicators and sweet spots, and we are currently mapping geological structures more accurately. Early results have been promising,” Sandrea asserts. After the AVO and seismic reprocessing, Sierra plans on carrying out further remapping and illumination studies, and it will eventually use this information to optimize the locations of the consortium’s exploratory wells. “Mitigating exploratory risks is a crucial component of our business strategy,” Sandera adds. While it might be slightly early to discuss the drilling process itself, he believes that there is significant room for innovation using new reservoir modeling through leading software. Sandrea is planning to begin drilling operations in 2017.