Private Companies Play Key Role in Democratizing Natural Gas

Q: What role would Jaguar E&P like to play in supporting Mexico’s growth in the new global natural gas market? 

A: In Mexico, we have a unique opportunity since natural gas has been underdeveloped and underexplored. Jaguar E&P is taking an active role in exploring the areas of Mexico that have not received the attention they deserve to increase the domestic production of natural gas. At the end of the day, there is an energy balance issue between Europe, Asia and North America, where natural gas is abundant, particularly in the US. Some of the US can be brought to Mexico and eventually made available to the world.

Nonetheless, issues closer to home are in the southern part of Mexico and in Central America, which is similarly underserved. The company works to increase production and to be able to assist to locate the gas where the consumption is needed. The goal is not just to supply Monterrey, Guadalajara or Mexico City, it is also about getting gas to remote communities that consume wood or biomass for micro-industrial processes. This way, they too can have access to a cleaner, more cost-effective fuel.

Jaguar E&P has been working on the idea of disconnecting gas production from pipelines. We have the first-ever commercial virtual pipeline project in Mexico where we are compressing gas at the wellhead and selling it via truck. Jaguar E&P wants to expand that process because it will do two things. First, it may allow the commercialization of gas that otherwise would not be economically viable. Second, it would bring gas to the consumer without the consumer needing to be connected to the pipeline network.

Q: How can the company help to develop an efficient natural gas infrastructure? 

A: The company has planned strong investments. Jaguar invests in midstream activity, taking advantage of the existing large regional pipeline network and making sure customers can connect to it with smaller-scale pieces of production. The time required to connect to the market in Mexico is challenging because of the regulatory framework but Jaguar E&P is making headway where it can connect to the existing network in the Burgos Basin and will continue to do that. What the company sees going forward when talking about distribution to end consumers is partnering with companies that already know what to do. Our core business is exploring, producing and processing natural gas. Nevertheless, we want to make sure our gas is used for good purposes and getting it to the end consumers, displacing dirty crude oil, charcoal or wood.

Q: There is a great deal of attention on large-scale liquefied natural gas (LNG) projects in Mexico. How could smaller LNG projects add value in terms of distribution?

A: The concept of massive LNG projects and giant regasification facilities to just deliver natural gas has fundamentally changed over the past 15 years. Now, compressed natural gas (CNG) and LNG can replace propane and diesel. The cost to be able to have very small-scale LNG projects has changed and what is known as micro-LNG is now feasible by producing 1Mcf/d of gas by loading one truck a day so communities can consume the LNG directly instead of having to regasify with expensive equipment.

We see a displacement over time of massive LNG projects by making a place for these smaller projects. The company wants to be involved in the production, exploration, processing and midstream side of the business and then do the distribution by partnering with established players. 

Q: How is the implementation of proven hydrocarbons production systems and new play concepts evolving in Blocks VC02 and TM01? 

A: The company announced a discovery last year in TM01, which is the largest discovery by a private company on land in Mexico over the last few years. It also has the advantage that it is close to the coast and an area where there is strong demand for natural gas and oil. The area holds a mix of natural gas and condensates. Jaguar E&P will do more work in that field next year, drill another well to delineate the discovery and try to figure out the commercial viability of the project. In 2021, the company also acquired 50 percent of a block that immediately neighbors TM01 and has a legacy field in it.

At VC02, the company is excited about a prospect called Uxu and plans to drill during 2H23. Uxu is on the same geological trend with Ixachi and the recent Tum discovery. 

Q: What have been the results from the recent 50 percent acquisition of the Tecolutla field?

A: Tecolutla is a block that was owned by a Canadian company in Round 1.3. It was one of the marginal blocks for redevelopment and the company drilled two wells, complying with all the work commitments. It was then looking for a local partner to take over the 50 percent working interest and operate the field on its behalf. Jaguar E&P was already working closely with this player because we have some shared operational activities. 

In the adjacent TM01, 100 percent owned by Jaguar E&P, we have three legacy fields that were drilled by PEMEX over 50 years ago. We still have some production in those fields and are now effectively operating the complex of four fields together. There is not a huge amount of production, between 150boe/d and 200boe/d. However, we can ramp up production to between 700 and 800boe/d with some investments that we plan to make in 2H23.

Q: How are your exploration efforts developing in the Burgos Basin?

A: The company has two areas and three blocks in the northern part of the Basin, all of which are in the development phase. Moreover, Jaguar is drilling a new development well in block four. We plan to drill four or five development wells in Burgos next year and we are installing our first gas plant in Block 4, which should be operational by 2H23. Following this, we will move forward and place a pipeline at Block 7, where the company has production through virtual pipelines because there is no pipeline infrastructure in the area. So, in those three blocks we have development activities. Our objective over the three years is to ramp up this production.

In the southern part of Burgos, Jaguar E&P has Block 8 and 8.9, which are much more frontier exploration. The company drilled a couple of unsuccessful wells over the past years. It is planning to drill three or four more exploration wells between those two blocks in the coming 18 months. Nonetheless, it is still trying to identify the best areas to drill there. There have been some discoveries offshore in the Burgos Basin and similar geological trends but we are far away from any commercial production there, as projects are much more in the early-stage exploration phase.

Q: What new technologies has Jaguar E&P implemented to make its blocks more efficient?

A: Jaguar has focused on efficiency, trying different artificial lift technologies to deal with liquids. Jaguar E&P has implemented standard production technologies, which improve the efficiency of the well while also reducing the required number of interactions with the wells. Given the security challenges in the area, this also reduces the number of people out in the field.

On the drilling side, the company has zoomed in on drilling efficiency, using the best technology available in Mexico like seismic reinterpretation and reprocessing.

Q: What are the company’s expectations for the future of the industry? 

A: The industry is going through a remarkably interesting period, where there seems to have been a return to the understanding of the value that private companies can bring and how they can supplement the value that PEMEX is creating in the country. Private companies can play a key role in areas that the NOC is uninterested in developing.

Going forward, the industry is coming to the end of all the exploration periods of the blocks in private hands. Jaguar E&P would like to see the creation of some mechanism that allows the unexplored territory that exists in Mexico to be explored. There are a huge number of hectares still sitting in the hands of the government that have never been put out there for auctions or bidding. The most important issue in Mexico’s energy is that CFE and PEMEX are healthy and Jaguar would like to see regulatory openness to the idea that there is a role for private companies to help them remain strong. As an industry, we have shown that private companies are very proactive when it comes to community engagement and education, too.

Jaguar E&P is a Mexican oil and gas exploration and production company. It competed in Round 1 and won 11 onshore blocks in Rounds 2.2 and 2.3, becoming the company with the largest number of onshore contracts in Mexico.