Understanding Production Coast in ChicontepecWed, 01/22/2014 - 09:28
Grupo Diavaz, which was already working in partnership with SINOPEC in Ébano, decided to bid for two blocks in the Chicontepec round of ISCs. “Once we became operators of the Ébano field, we decided to look at other opportunities where we could increase production,” says Luis Vázquez Sentíes, President of Grupo Diavaz. “We set our sights on Chicontepec due to the fact that it is a difficult field in which recent efforts to increase production had failed. PEMEX has invested a lot of money without getting the results that its executives expected.” Vázquez Sentíes explains that the Humapa and Miquetla blocks in Chicontepec attracted Grupo Diavaz’s attention, and the company created a new subsidiary for the sole purpose of bidding on them. “Operadora de Campos DWF is an entirely owned subsidiary of Grupo Diavaz. While we initially created this subsidiary with the intention of partnering with Weatherford, we never settled on the terms but the name stuck,” explains Vázquez Sentíes. “We could not go into Chicontepec with DS Servicios Petroleros, operating in Ébano, as it is a 50-50 partnership with SINOPEC. We could not do it either with the consortium we formed with Brazilian Petrobras and Japanese Teikoku Oil for the Burgos Basin, so we had to create a new company.”
Operadora de Campos DWF bid on both Humapa and Miquetla offering the same fee per barrel of US$0.98, with a 1.901 factor for Humapa and a 1.501 factor for Miquetla. The company lost the first block to Halliburton’s US$0.01 per barrel fee. “Our company was awarded the Miquetla block, where we want to show our prowess as operators,” claims Vázquez Sentíes. “We already knew the two blocks. Since we were particularly afraid of Chicontepec and the challenges it presents, we conducted several studies in order to be better acquainted with the fields’ characteristics.” Grupo Diavaz invested heavily in 3D seismic studies to figure out where to bid and what the prospects of those fields would be. “We got a two-year contract to test our skills in increasing production for the fields, and we expect to extract all economically and technically viable production over the following 20 years,” says Vázquez Sentíes. “Grupo Diavaz started operating with a 400b/d production and we are already producing 500b/d. We believe that there is also some shale oil potential in Miquetla.” The differences between Ébano and Miquetla are significant. Ébano has a contract clause where 75% of the total investment is reimbursed to the company, while in Miquetla the entire cost is reimbursed. “By applying a simple formula, we figured that we could extract each barrel at a marginal cost of US$42,” Vázquez Sentíes explains. “We need to figure out a way to extract each barrel for less than US$42, which would allow us to keep the difference as profit.” Vázquez Sentíes knows that Grupo Diavaz has to be extremely efficient in its operation, since any mistake or downtime could end up voiding a sizable portion of that potential profit.
The Miquetla block was discovered in March 1948, and includes the Miquetla, Coyol, and Palo Blanco fields within an area of 112km2. Total accumulated production at Miquetla equals 10.7 million barrels of oil and 2bcf of gas, and in June 2012 production was 886b/d of 35°API oil and 2.5mcf/d of gas. Miquetla still holds 15.9 million barrels of oil and 24.2bcf of gas in 1P reserves, and 163.8 million barrels of oil and 436.8bcf of gas in 3P reserves. Its prospective resources add up to 59 million barrels of oil and 141mcf of gas, making it an interesting field for private companies. Four companies bid on this block during the third round of ISCs: Constructora y Perforadora Latina with a fee of US$7.50 per barrel and a factor of 1.263; a consortium including Finley, CH4, and Royal Shale with a fee of US$6.99 per barrel and a factor of 1.142; Baker Hughes, through its Petrolite subsidiary, with a fee of US$0.89 per barrel and a factor of 1.1; and winners Operadora de Campos DWF, a subsidiary for Grupo Diavaz, under a fee of US$0.98 per barrel and a factor of 1.501.
Discovered in March 1956, Humapa covers a 128km2 area that includes the mature fields Coyol and Humapa. This block holds 12.4 million barrels of 27°API oil and 18bcf of gas in 1P reserves, and has already produced 0.52 million barrels of oil and 0.27bcf of gas. Production was 1,170b/d of oil and 2.1mcf/d of natural gas on of June 2012. The area holds 3P reserves equivalent to 206.9 million barrels of oil and 557.3bcf of gas, while prospective resources are estimated at 101 million barrels of crude and 234bcf of gas. The third round of ISCs saw six companies bidding for this block: Constructora y Perforadora Latina with a fee of US$15 per barrel and a factor of 1.263; a consortium including Finley, CH4, and Royal Shale with a fee of US$8.99 per barrel and a factor of 1.142; another consortium that included Andes, GAIA, and Integra, under a fee of US$4.94 and a factor of 2.528; Grupo R, with Industrial Perforadora Campeche, under a fee of US$2.95 per barrel and a factor of 1.1; Operadora de Campos DWF, a subsidiary for Grupo Diavaz, with a fee of US$0.98 per barrel and a factor of 1.901; and eventual winners Halliburton, with a surprising fee of US$0.01 per barrel and a factor of 1.25.