Juan Javier Hinojosa
Director General of PEMEX E&P
View from the Top

A Year Rich in Discoveries

Sun, 07/01/2018 - 11:44

Q: How has PEMEX’s upstream strategy changed with the new face of the industry?

A: PEMEX’s business plan before the 2013 Energy Reform was directed at attaining specific hydrocarbons production targets, improving process efficiency, satisfying the country’s energy demand with a competitive-cost structure and strengthening the company’s social responsibility policies. After the reform, new conditions focused PEMEX’s operations toward businesses that generate higher value. Our business plan after the Energy Reform was designed under a profitability target and an open market vision, recognizing the possibility of creating alliances or associations to reinforce PEMEX’s capabilities to achieve its targets in this competitive environment. To ensure the NOC is on track with its objectives and expected upstream performance, we are closely monitoring specific parameters, such as its financial balance, oil production, production costs, reserves incorporation and the safety, health and environment protection frequency index.

Q: What were the highlights of PEMEX’s exploration, development and production activities during 2017-18?

A: 2017 was rich in discoveries, as the 11 new fields attest. In deepwater, Nobilis holds promising reserves. In shallow waters, Koban, Teekit, Suuk, Hok, Cahua, Octli and Xikin were the outstanding additions while Chocol, Valeriana and Ixachi will increase our onshore portfolio. Through strategic partnerships, we continued building a successful track record in the country’s licensing rounds. In Round 1.4, we were awarded Block 3, while in Round 2.1 we were able to claim Blocks 2 and 8 with our partners. We also managed to allocate our first farmout in the Trion block. From a production standpoint, PEMEX’s onshore farmouts Cárdenas-Mora and Ogarrio were signed. While the Santuario-El Golpe assignment was migrated to a partner contract scheme, the Ek-Balam field was migrated from an assignment to a contract without a partner and a special tax regime was approved for 21 assignments by the Ministry of Finance. In 2018, PEMEX boasted the highest number of exploration contract obtained from Rounds 2.4 and 3.1, with a total of 11 contracts. Regarding its production activities, the Misión and Olmos fields were migrated from assignment to a contract with a partner, a shutdown wells reactivation contract was awarded to a third party and PEMEX obtained the required endorsement to bid seven onshore clusters.

Q: How is PEMEX dealing with Cantarell’s production drop to stabilize and eventually increase production numbers in a profitable, safe and sustainable manner?

A: There is no doubt that in recent years the main challenge has revolved around replacing the production decline of Cantarell and stabilizing the production platform of Mexico. Another important target of this administration is to operate in a safe and sustainable way, a continuous imperative for the NOC since its creation. To increase production, PEMEX business plan focuses on the most profitable fields or assignments under its operation and finding greater efficiencies through process improvement measures and new hiring strategies that will increase its activity. PEMEX also designed an aggressive program of farmouts or strategic associations that will increase the relevant oil fields’ production, spearheaded by better practices, technology and larger investments. In other words, PEMEX needs to develop its hydrocarbon reserves at a greater speed.

Parallel to that, secondary recovery projects are being designed to increase the recovery factor of existing fields and assignments. To obtain production in the short term, the new discoveries made by PEMEX are also being scheduled for their development in shorter timeframes compared to previous years. In the medium term, PEMEX is preparing to develop unconventional reserves, such as shale reservoirs. To do this, unconventional wells are being scheduled in the areas with the greatest potential to corroborate existing reserves and extract them in the coming years. In the long term, the deepwater projects will contribute to the strategy of increasing the production capacity and profitability of PEMEX.