Shell Expands Offshore Exploration
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Shell Expands Offshore Exploration

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Conal Quinn By Conal Quinn | Journalist & Industry Analyst - Fri, 05/13/2022 - 18:00

The National Hydrocarbons Commission (CNH) approved Shell’s plans to modify its exploration project in a deepwater cluster off the coasts of Veracruz and Tamaulipas. The CNH granted the world’s 4th biggest IOC a request to expand exploration plans for the deepwater contract CNH-R02-L04-AP-PG04/201. The 1,900 km² block is located in deep waters in the Gulf of Mexico, 239 kilometers from the shore.

Shell was granted the contract in 2018 and has since carried out the reprocessing of 3D seismic data, regional and detailed geological studies, stratigraphic and petrophysical studies as well as geochemical and hydrocarbon analyses. With the modification request, Shell aims to continue with the evaluation of the petroleum potential in the area and to incorporate hydrocarbon resources by drilling a well to target Oligocene, Eocene and Paleocene plays. 

Shell requested that the contract be revisited due to technical and economic changes arising from drilling activities that it carried out in nearby blocks. The IOC now seeks to drill a prospective well and continue exploration studies with resource estimation and evaluation of post-drilling information at a base level scenario. Once enhanced infrastructure is put in place, Shell then aims to explore the block further and drill up to three sidetracks at an incremental stage. 

At the base-level scenario, the IOC expects to find prospective resources for 80MMboe, with the possibility of recovering 20MMb of light oil. With the modification approved by the regulator, investment in the project is expected to rise to US$55.62 million for the base scenario and US$112.78 million for the incremental scenario before the contract expires on June 27 2023.

This news comes after Shell’s Director of Corporate Affairs in Mexico announced the British company’s plans to continue investment in Mexico with a long-term vision. Commenting on the uncertainty that the federal government has been accused of generating for private companies operating in the Mexican energy market, Lucía Bustamante told El Sol de México that the company has a vision for Mexico for at least the next 50 years, which anticipates policy changes in the energy sector as administrations come and go: “How many administrations are we going to live through in those 50 years? More than seven. It is precisely long-term thinking that saves you from momentary challenges. We hope that in the future the public sector will be more aware,” she said. 

The British company also announced plans last month to drill five further oil wells, open more gas stations and initiate a pilot program for electric cars. Bustamante pointed out that Mexico continues to be the 13th largest economy in the world. For a global company like Shell with operations in over 80 countries, the potential benefits are too great to miss out on. 

Shell plans to drill five oil wells as part of its continued CNH-approved work plan, which will require investment of between US$60 and US$80 for each well. Bustamante noted that such a project will generate at least a thousand new jobs to boost employment in Mexico. 

The IOC also operates 230 gas stations across 17 Mexican states and plans on expanding this portfolio. Construction of new gas stations is expected to cost between US$1 and US$3 million each, while upgrading and maintenance of existing service stations are estimated at US$300,000. 

In keeping with its move towards a more sustainable business model and support for energy transition, Shell announced plans to upgrade its gas station to incorporate facilities for electric cars. The pilot program will begin in Puebla, and if successful, the IOC then hopes to implement this initiative throughout the country.

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