Private Operators' Production PlansBy Miriam Bello | Wed, 07/14/2021 - 14:52
Mexico’s most important private offshore operators were struck by the pandemic at a decisive moment. Some had achieved or were close to achieving an early production stage relying on their field development plans. While COVID-19 caused delays in some production start dates in 2020, operators continued to stride forward with their production goals. Reaching a production phase brings additional questions regarding commercialization, operational efficiency, and even further exploration. It will also come with hard choices in terms of investment volumes and the valuation of assets. Mexico Oil and Gas Summit 2021 presented the panel “Private Operators' Production Plans” on July 14, where experts of the industry aimed to clarify the kinds of variables that operators are dealing with while approaching the production stage.
“Oil companies have had to deal with the new reality of the pandemic and have managed to attract new talent. We continue to adapt to the new opportunities and challenges,” said Schreiner Parker, Senior Vice President & Head of Latin America of Rystad Energy and moderator of the panel. Even the few operators who might already be producing on some scale, are still wondering about the timing of their next step; maximum advantage must be taken in every each decision to expand outputs in a way that generates the most benefits when combined with market forces.
Andrés Brügmann, Country Manager Mexico of Fieldwood Energy made a recap of the events currently shaping private operations plans. He commented that today’s scenario is based on the events of 2020, when the industry was already facing low prices, and soon after, COVID-19 took center change and changed the way they operated. “We had to update our offshore operations, while still developing an offshore campaign.” Brügmann explained that having over 6,000 people offshore became harder to manage, as the entire world faced situations like the borders closing. “Over a year after the pandemic started, operators have learned how to cope and vaccination has helped, however, we should keep the guard up.” Brügmann said that the industry has to learn how to deal with COVID-19, but that this is based on intensive testing prior to embarkation, during and randomly. “To date, prices are also coming back, which is the reflection of the reactivation of economic activity, thus we see a bright future for our industry,” said Brügmann.
Sylvain Petiteau, Vicepresident Reservoir, Development, Engineering Non-operated Assets at Wintershall Dea México added that during these changing times and based on the length of the projects of the industry, the adjustment on onshore production operations is critical. “The time frames of each project asks of us to be reactive, which for instance, this is something we can do at our Ogarrio project, as Wintershall Dea operates directly from the country we have activities.”
In addition, Petiteau addressed SENER’s unification of Zama oil field to be shared between the Zama field, discovered through Contract CNH-R01-L01-A7 / 2015 in charge of Talos Energy Offshore, and the assignment with number AE-0152-Uchukil whose ownership is a cargo of PEMEX. On May 2020, Wintershall Dea announced two significant oil offshore discoveries on the Zama oil field.
“Zama in particular has different parties operating and is not easy to align, however, despite the disagreements, we have to recognize all stakeholders need to define a plan to keep maturing this project, which will not bring production in 2021. We need to mature partnerships to have the common goal of the project.”
Petiteau continued by saying this project required large investment, which means more stakeholders in the project, which raises the complexity. This, assimilating the data of the platforms after they are build is essential for this and every project. “Zama is an example of the significant value of the profit, the investment has been very large. We need to see the whole picture, from the results of the first wells, we can have an idea of how the others will develop, but everything has to be on the most optimum time frame.”
Alligned with Petiteau commets was Brügmann’s comments on the time scale of the projects. “The execution today was planned 5-10 years ago. For instance, Fieldwood, is seeing the results from 2015, from all those years on investing and planning. We are just starting commercial market next month.” He said the company has a project on Phase 2, which is ramping up the production of the fifth largest research field, “there is a lot of activity that will take more than US$2 billion dollars of investment.“
Brügmann also presented the importance of geological understanding, which will inform for future drillings. “In 2017 we began wells for our Cretaceous and Jurassic fields. “The structural design of the wells required for our objectives is quite complex. During 2021 we expect to complete four wells (our original two appraisal wells and our two development wells), bring production online and thus continue drilling our Ichalkil-6 well.” The more data, the better the certainty to locate future wells.
Important changes on capital market are also happening, according to Brügmann. “The authorities are strict regarding governance and transparency, there are also additional requirements related to IFC, with social activities and community relationships, which is a significant change with the past model of Mexico.” He also said that ESG standards are something oil regulators should put at the top of the list, as it could generate a positive change in the industry.
Petiteau complemented the changes happening with the relevance of good stakeholder management, “without it, a project cannot happen. Taking all the parts that make up a project into account is necessary for it to be successful.” He added that long term view of things, is critical when going into a country that has a changing environment, such as Mexico with the Energy Reform. “Everyone working on this industry has the same goal: develop a project and collect resources, but this is not an easy task.”
Parker recapped the pipeline of development and planning for private operators, as asked the experts about the incoming challenges they see in Mexico. For Brügmann these are two: technical and regulatory. “On the technical side, drills are complex and deep, almost 6 km in high temperature and varying pressure. Regulation wise, for projects that are doing things for the first time we become pioneers.” He used the example of Fieldwood being the first company to sell oil for the Mexican market, the first on the new regulation of wells, the first one to lay a pipeline with a single campaign, the first operators to lease the Tumut platform from PEMEX, and the first offshore lease in Mexico ever. “However, there are a lot of synergies among layers. Operators do not complete developing the fields, we work together to find solutions.” Lastly, Petiteau added that within the collaboration of the industry, “we cannot be naïve, and must have the goal of the project very present, because that is shared by all the stakeholders.”
Brügmann closed by saying that private operations can focus on the potential of reserves, “we need to continue pushing and helping PEMEX as it is the largest operator in Mexico, the resources of the country are much larger than PEMEX capabilities, which is where the private sector comes to support.”