The Path to Drilling Certainty

Q: How has Kasoil conducted its operations during the COVID-19 shutdowns and the impact of bottoming oil barrel prices?

A: We decided to work from a home office set-up starting March 17, 2020 to deal with COVID-19 and take preemptive sanitary measures given how this pandemic is evolving internationally. All personnel involved in administrative and project management tasks are now working in that modality. It became evident to us that companies needed to take an active role and immediate action and to set an example for working from home. Fortunately, we were able to work from home due to the nature of our two most important business lines. The first concerns projects that contribute to the national incorporation of hydrocarbon reserves. This includes static and dynamic reservoir characterization activities. These projects are conducted by geophysical specialists and consultants focused on reservoir geoscience. These specialists apply the tools, seismic interpretations, software solutions and licenses to generate models and studies that determine the volume of hydrocarbons and the optimal location of wells to be drilled. The studies have been delivered to CNH and constitute an important part of the basis for the drilling permits awarded to PEMEX.

Despite the crises, we have been able to continue our work remotely through a variety of digital tools. In fact, through these new working methods we have been able to make our delivery times more efficient without increasing costs. This, of course, would not have been possible without effective leadership in each team and a focus on results over time.

Our second business line, however, has presented us with a number of challenges. This line deals with direct operational intervention. It has become more difficult to guarantee the safety and well-being of our employees in this context. Fortunately, PEMEX has guaranteed the continuity of operations for its service providers like us. However, there have been cases of COVID-19 at some offshore platforms and facilities, such as Abkatun. We have our own contingency response protocols in place to foster trust and confidence among our employees who might have to work in these environments.

Almost all of our projects are offshore. We are actively participating in all PEMEX studies and also with all of the main operating companies dedicated to the development of fields to guarantee the incorporation of reservoirs. We are particularly focused on the “presidential fields.” Unfortunately, I cannot name or enumerate these fields, but they have a considerable commitment of resources destined to them, particularly in the role their reserve incorporation plays in the national exploitation strategy. We participate extensively on all fields managed from Mexico. We are also using our operational services as a platform to hold onto our non-PEMEX client portfolio. That part of our portfolio might pose some challenges in its future growth considering that the financial models that these companies work under have proven to be rather conservative and very reactive to current oil price volatility. As such, they have significant solvency issues, since they were not contemplating a scenario as negative as the one currently unfolding.         

Q: How does Kasoil’s previous experience with downturns and oil price volatility give it a unique perspective on the industry’s current situation?

A: Considering that we just closed the first quarter of 2020 and that the oil market follows its own distinctive dynamics, I frankly believe that it is still too early to compare past situations to the current landscape. There are too many factors and variables left to be defined and way too much uncertainty. Despite all this, we must continue with our operations. Considering the obvious risk involved, our perspective on the matter continues to be positive. We base this outlook on the fact that oil and gas will continue to be a strategic and essential sector for the Mexican economy, which will lead to protective measures being enacted by the state. We believe that this administration needs to start prioritizing the financial side of its oil and gas responsibilities so that investments can start flowing as efficiently as possible. We have been told that PEMEX is allocating resources to cover all of its outstanding debts with its service providers. This would be an extremely important step toward the sector’s reactivation.      

Q: What is the most important approach when evaluating PEMEX’s new fields?

A: One of the key ways in which we characterize reservoirs and their areas and targets of interest during drilling campaigns is through advanced gas chromatography–mass spectrometry and x-ray fluorescence (XRF) spectrometry. By compiling data and measurements on oil and gas volumes at strategic moments during the drilling process, spectrometry allows us to separate, identify and quantify heavy and light components in the path of the drilling campaign. We can determine the presence of different types of hydrocarbons, different ratios of oil-gas concentrations and different levels of water saturation all along the geological intervals likely to be in the drill’s way. Our spectrometry equipment can be adjusted to different ROP drilling conditions and different drilling mud and fluid densities measured by ppm. Additionally, XRF spectrometry can be used to determine the chemical composition of a wide variety of samples, be them solids, liquids, muds or dissolved dusts. The system can deliver a quantitative analysis of up to 40 elements per sample. All of these tools allow us to identify zones of great economic potential and grant increased certainty for those drilling these wells. We can also use this information to optimize drilling timetables and schedules.

We are the only ones in Mexico that apply these technologies through these particular methodologies. This has allowed us to become a strategic part of PEMEX’s drilling efforts. We now work with most wells they are drilling in new fields. Even though we work entirely on proven reserves, this added certainty plays an enormous role in reserve incorporation and new field development. Mitigating uncertainty in a way that guarantees reserve incorporation generates enormous value for PEMEX’s operations and for its balance sheet, so much so that our participation continues to be considered essential throughout the current circumstances. Once we were able to prove to PEMEX that we could guarantee the future production of each barrel that we incorporated, the weight of our contributions became clear to them.

Q: What are the most important goals and opportunities you would like to reach in the short and medium terms?

A: In the deepwater sector, we usually see very large and specialized companies that we smaller players can expect to have a tougher time competing with, even though we are quite competitive as service providers for the majors in shallow waters. As long as we continue to prove ourselves and the value we create for our clients in shallow water projects, we can expect to take advantage of deepwater developments as they begin to move toward more robust drilling campaigns and field development phases in the coming years.

In a broader sense, I would say that our agenda for 2020 remains more or less unchanged. These trying times are an opportunity for us to continue our work unabated. We can translate scarcity into prosperity by reaching our goals despite these difficulties. These circumstances have also allowed us to make much more strategic choices when it comes to selecting our future projects in a way that refocuses our business model and internal corporate finances. We will have to be more selective in our choice of projects going forward, given that the current situation will soon become one of liquidity for many companies in the industry. As such, we will need to make choices based on the reduction of risks toward the fulfillment of our goals, which remain the same. We hope for better times ahead, but what is important is to promote the idea that this industry moves forward regardless.            

Kasoil is a Mexican exploration service provider founded by female oil and gas workers left unemployed after the downturn created a crisis in the state of Tabasco. It also provides integrated oil-field services and talent management.