What will happen to PEMEX’s strategy after the Energy Reform?Wed, 01/22/2014 - 10:02
Q: What will happen to PEMEX’s exploration strategy after the Energy Reform takes hold?
A: We need to keep a balance in our portfolio, but in the short-term, we need to emphasize the incorporation of 1P reserves. This does not only consist in reclassifying 2P and 3P reserves into 1P, we also need to increasingly add reserves from new discoveries. We need a clear balance between new and reclassified reserves to reach a sustainable reserve replacement rate close to 100%. Just thinking about reclassifying reserves without focusing on both new and reclassified reserves means that we are resting on our laurels. In that sense, we need to invest more in what is considered to be the normal development process, and incorporate a lot of 3P reserves when starting on a new discovery. If we do not incorporate 3P reserves, then we are not going to have enough reserves to eventually reclassify them from 3P to 1P. We need to put a lot of money in both strategies in order to be successful.
Q: To which extent did the Energy Reform and Round Zero influence PEMEX’s exploration strategy and budget allocation?
A: It definitely had an impact. When a company operates in a context of change, it is normal to keep an eye on what will happen to pursue a future-proof strategy. Given the amount of reserves we have, it is reasonable for us to take risks such as the ones we took in 2013 while waiting for the Energy Reform to be passed. We also used exploration data collected this year to define the opportunities we wanted to defend in Round Zero and in the future. If we had not been able to enhance our understanding of those fields in the context of our overall exploration database, it would have meant the exploration efforts of 2013 were not successful. During 2013, we were also very focused on delimiting what we have, in order to draft our Round Zero proposal. We made certain we were not overestimating our figures only to end up regretting it later. The government has a very important role in defining the exploration rules, and the information extracted should not be free for everybody. We want to be treated as a normal private company in terms of information sharing: if we supply confidential or valuable information to another operator, we expect to receive the same treatment from that company and, thus, be able to access its information. Information sharing is a public policy decision that stands above any corporate decision within PEMEX.