News Article

The Saga of Zama

Wed, 07/19/2017 - 10:22

Sierra Oil & Gas expects to begin producing first oil at its Zama-1 well in about four years, Iván Sandrea, the company’s CEO told the Mexico Oil & Gas Summit 2017. Presenting the opening keynote presentation, The Saga of Zama, in Mexico on Wednesday, the head of the first private player to strike oil in Mexico also outlined the importance of the Energy Reform, Mexico’s privileged position in the hydrocarbon industry and provided an outlook for the future.

“As the major discovery that it is, we think we will reach first oil in around four years,” said Sandrea, answering a question from the audience, while also pointing out that the oil industry has characteristically long processes.The company is still doing appraisals, getting plans approved and obtaining the necessary permits, he said, adding that every step of the process has to be carefully evaluated and designed. Sandrea that Sierra is the only company to have acquired three of the four bid permits necessary to meet its legal obligations, calling that a testament to the company’s engagement with Mexico’s regulatory authorities and its desire to move ahead swiftly with its timeline for developing its block.

Shortly after Sandrea’s presentation, hydrocarbons regulatory CHN announced it would delay Round 2.4, scheduled for December, until Jan. 31, 2018. It said it wanted to give companies time to analyze the recent discoveries at Zama-1, Amoca-2 and Amoca-3. Thirty blocks will be bid during Round 2.4. The regulatory also said a new rule would apply to the rounds: if both maximum added investment and royalty are offered, an economic offer must be included in the same envelope.

Although the industry has fixated on Sierra’s Zama find, Sandrea said that the other blocs won by the company will be managed with the same level of commitment and passion they have consistently showcased in the industry. “We are focused on drilling Block 2, as our contract with CNH outlines. The same applies for blocs 4, 5 and 11. It is only a matter of establishing the order of priority in drilling the blocks,” he said. These decisions will be taken by the operator, in unison with its partners.

Sandrea also shared his vision for the future of the oil industry in general and Sierra Oil & Gas in particular. “I don’t think there is a better place to be doing what we are doing. The quality of the hydrocarbons, the opportunities in place, the scale of the basins are too great to be overlooked,” he said. Considering what has happened in the last three years, there is not much more shallow water and offshore activity left for the taking in the southeastern basin. “Finding another Zama will be difficult,” he warned. Still, Sierra’s CEO insisted that there is much work left to be done. Particularly, developing and marketing the awarded blocks, IOR and the energy infrastructure requirements necessary to meet the demand, among others.

To meet the coming challenges, Sandrea said companies need to adapt. “Oil companies need to metamorphose. You will see Sierra continue to evolve. Our vision is to be a major independent player as an energy provider. Our journey will involve allocating capital to disruptive technologies, rejuvenation and thinking outside the box,” he said.