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Tough Times Require Dedication, says Golfo Suplemento Latino

Concepción de la Garza - Golfo Suplemento Latino
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Peter Appleby By Peter Appleby | Journalist and Industry Analyst - Tue, 06/23/2020 - 12:41

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Q: How are developments progressing on the onshore VC01 block?

A: The partnership has not been able to start producing on our VC01 block. We are waiting for the commercialization contract from PEMEX. This is the only element that is missing before we are able to proceed and produce. We were hoping to start in June, though the current situation makes that more difficult. PEMEX, like every other company, is unable to work at full capacity at the moment, but we are trying to get the contract as soon as possible. When we receive it, the partnership will immediately begin production.

We will start by repairing five wells on the block. These will be minor reparations and soon after we will open the pump. Our initial plan was to drill three wells in 2020, the AO exploration well in Plan del Oro and two appraisal wells, BO-Del in Plan de Oro and B3-Del in Tres Higueras, but these plans have been moved to 2021 because of depressed oil prices. We do not feel 100 percent secure so we will begin by opening one well before we move on to the other four. We expect to produce our first barrel from the block on July 6. We will assess our production rates from these five wells before drilling but our initial forecast is for 75Mb/d from these five wells. Production will drop by about 20 percent every year.

 

Q: What impact will the pandemic have on GSL’s budget?

A: We may have to reduce our budget by about 35 percent. We have had to cut personnel because some of our clients have been forced to reduce their own budgets and therefore reduce services. However, we have just signed a contract with Hokchi, a new client for us. This is an O&M contract in Paraiso, and we will be helping with maintenance and electrical work. This new contract should mean that budget cuts will not be quite as severe, but we still will have to cut by a minimum of 25 percent.

 

Q: GSL also maintains the boilers of the National Refinery Network. How is this contract progressing and how do you hope to expand it?

A: GSL expects these maintenance contracts to continue and even increase due to the escalating use of fuel oil at PEMEX refineries and in CFE assets. Our role with PEMEX is to use the emulsification offered by our PEP-99 additive to reduce the pollution that the fuel oil produces. This is a vital part of the process because the pollution produced by fuel oil in the refineries’ chimneys could hinder the country’s environmental commitments. PEP-99 also helps reduce the costs and time associated with cleaning the boilers. Our product has a proven track record. In Minatitlan, for example, we ensured the boilers did not have to go out of service to be cleaned for over two years. Additionally, we sell parts for maintenance reasons.

We use another of our chemical products to help clean PEMEX’s production lines without them having to go out of service and without having to apply heat. The capacity at the Minatitlan and Madero refineries has dropped off. Madero in particular has almost ceased to function. But with the increased use of fuel oil, we expect this situation to change, particularly at refineries in Salina Cruz, Cadeyreta and Salamanca.

Right now, we are speaking with CFE to explain further how our product functions and the success it has provided PEMEX for the last 19 years. When the quarantine period is over, we expect to meet with CFE and we hope to have a trial period through which we can demonstrate the quality of our product.

 

Q: How else is GSL’s portfolio expanding?

A: The situation in northern Mexico has been very difficult. We only have one contract in the northern region with Mexican company Jaguar E&P. We also carry out small supporting work for a number of other companies in the region. But this is not the situation we had hoped for.

The services we offer in the north, including truck units for the installation and removal of capillary tubing, are supported by the latest technologies. However, because this is an innovative technology, it is slightly more expensive than traditional forms. The current depressed prices we are witnessing in the market have not been favorable in helping to expand our client base because companies are concerned about their finances. Effectively, they prefer to pay less despite the poorer quality.

Another obstacle that is impacting not only us but the entire industry is the issue of payments, which we are not receiving. For example, we carried out some work alongside our partner Tundra Oil & Gas for Altamira Petroleum Company (CPA). CPA has not paid us because PEMEX has not paid them.

 

Q: Could the current crisis present an opportunity to GSL?

A: There is no benefit from the COVID-19 pandemic for GSL. Instead, the opportunity is PEMEX’s decision to use fuel oil for the refining process. PEMEX had previously stopped using fuel oil in favor of gas, but the company is now returning to fuel oil.

In the field, I believe that the Hokchi contract is a superb opportunity for GSL because it takes us back to the southern region of Mexico, where we did not have as much of a presence. More recently, we had been working in the north in areas like Ebano, Cacalilao, Altamira and Poza Rica. We also work with Lifting de México in Cuichapa. For a long time, we had had contracts in Agua Dulce, Cinco Presidentes and San Marias. We lost those contracts after making the decision to begin focusing on northern Mexico. We are glad to return to the south and believe that it is time to recover our presence there. Once present, we believe it will be easier to open other leads in the area. I am positive that oil prices will eventually recover. Once this happens, more opportunities will emerge. At present, we are focusing on survival. 

 

Golfo Suplemento Latino is a Mexican company specializing in the operation and maintenance of wells in mature fields, with particular attention on well stimulation. It also provides maintenance and operational services to five PEMEX refineries

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