Partnerships Crucial for Pemex´s Future Success

Q: Why have the farm-outs not been launched yet, and what should the industry expect in this regard?

A: We sent a request to the Ministry of Energy, which then asked for CNH’s technical opinion, resulting in a favorable approval for the migration of 14 out of the 17 amended farmouts. Five were onshore fields: Ogarrio, Cárdenas, Mora, Rodador, and Samaria. Four were in shallow waters, including Bolontiku, Sinan, Ek, and Balam. Three fields, Ayatsil, Tekel, and Utsil, are extra-heavy oil producers. Finally, we proposed two deepwater gas fields, Piklis and Kunah. Although we proposed three deepwater oil fields, Trion, Exploratus, and Maximino, we did not submit a request for these to be farmed-out. CNH approved the 14 fields that we requested. The initial idea was to have a diversified portfolio of fields to attract different types of partnering companies. We could attract a great deal of offshore operators, and while the cohort for shallow water would have not been as large, it would have included some big names. Heavy oil fields would attract highly specialized companies, while the deepwater fields would bring the majors. However, we were not able to take that path, and we learned from the new process. CNH decided to launch Round One before the farm-outs.

The onshore fields that will be farmed-out are attractive enough to bring companies to work with PEMEX even in the current market conditions, because the lifting costs in mature fields are not so high, ranging between US$10-30 per barrel, and could be lowered by introducing state-ofthe-art technology. In the case of offshore shallow water assets, incorporating water injection infrastructure will also drive the costs down. The conditions have changed greatly from the time when we submitted our proposal, so we are adjusting the farm-out opportunities to the oil price. Since deepwater gas, deepwater oil, and heavy oil production are linked to the oil price, we are reviewing with the Ministry of Energy if it is worth moving forward. For the other blocks, we are assessing if the budget we have makes them attractive. I find those fields appealing because the onshore fields have close to 220 million barrels in 2P reserves, whereas the fields tendered in R1-L03 had between 60-70 million barrels. This means the onshore reserves offered in the farm-outs are four times larger than the reserves awarded in R1-L03. The farm-outs now represent 150,000b/d, which amounts to about 5% of the current production, and that should make them an interesting option for the industry.

Q: What are the main traits PEMEX will look for in its partners?

A: In the case of mature fields, we are looking for technical expertise and technology, along with financial muscle. In return, PEMEX is offering knowledge of the fields, infrastructure, facilities, and the wells, areas in which we have made considerable investments. We have produced all those fields through primary recovery, and we need a partner to help us increase the recovery factor by adding more energy to the reservoir, which can be done by injecting water or gases, such as CO2, air, or nitrogen.

Q: What role will farm-outs play in PEMEX’s deepwater strategy?

A: PEMEX decided not to carry out deepwater developments on its own in order to reduce risks, so it is seeking to partner with majors. We have been in touch with the major oil companies who are interested in a partnership because of PEMEX’s knowledge of the basins. PEMEX is trying to include fields discovered in Perdido, although we have not yet submitted these to the Ministry of Energy because we are still ending the modifying process of the entitlements. Fields from R1-L04 will take at least ten years to stream oil, but the deepwater fields from the farm-outs could be in production a little faster.

We need to move all our opportunities and that means establishing a strategy. Part of that is not releasing fields in some instances, as we need to look at the industry, the price behavior, and the price forecast. Even at US$40 a barrel, companies in Eagle Ford and Marcellus are producing important volumes, which highlights the fact that everybody is working according to a strategy. The Energy Reform was meant to boost the country, and that also includes PEMEX. We have the goal of maximizing the benefits by using the tools and means derived from the Energy Reform, which is as important as any other entity shaping the country’s oil and gas industry.