Competitive fuel market is still some years off, analysts say

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Mexico News Daily / Mileno / June 25

 

Time, more investment required before gas prices will drop

It will take another two to five years to attain a truly competitive fuel market with lower gasoline prices for motorists, according to industry specialists.

The federal government’s 2013 energy reform opened up Mexico’s retail fuel market to foreign and private companies and there are now more than 2,000 gas stations that operate under a brand other than the state-owned Pemex.

But the increased competition hasn’t translated into cheaper fuel prices as had been expected.

“It was thought that it would be faster but that’s not the case,” said Rodrigo Favela, a consultant and fuel market analyst.

Favela told the newspaper Milenio that based on experiences in other countries, creating a competitive market takes time.

In addition, greater competition in the retail fuel market is not enough on its own to generate lower fuel prices, according to Mexico’s central bank.

In its regional economies report for the last quarter of 2017, the Bank of México said greater investment is needed in the entire gasoline supply chain from the refinery to the gas station in order for prices to drop.

Sebastián Figueroa, CEO of energy operator FullGas, told Milenio that gas stations in the north of the country could start competing on price within one to two years.

He cited proximity to the United States, the presence of existing pipelines, greater ease with which fuel can be imported and lower logistics costs as factors that will likely see fuel prices drop more quickly there than in other parts of the country.

In central states, Figueroa predicted that it would be another three to four years before competitiveness among gas stations increases due to the need for more infrastructure while in the southeast of Mexico, it could take up to five years or more.

In the latter region, the development of the new infrastructure that is needed — such as pipelines —is more complicated because of geological factors, he said.

Considering that fuel prices have actually risen since Mexico’s previously monopolized fuel market opened up, Milenio asked the president of the Senate’s energy committee whether energy reform should be considered a failure.

Salvador Vega Casillas, of the opposition National Action Party (PAN), rejected that suggestion but said it was a mistake to liberalize fuel prices at a time when the value of the US dollar was high against the peso. Gasoline prices were fully deregulated by November 30 last year.

However, Figueroa said that if the government had waited any longer to free prices, more problems could have been created for the sector because a subsidized model is not sustainable.

He maintained that the reform is a positive for Mexico, charging that having only one participant in the downstream sector led to inefficiency whereas competition forces gas stations to offer better deals to motorists.

Federal Energy Secretary Pedro Joaquín Coldwell has also contended that an open and competitive market is the best way to achieve gasoline prices that are accessible to all Mexicans.

Favela explained that there are three main factors that determine the price of petroleum at the pump: international crude oil prices, the prevailing exchange rate and logistics costs.

In order to generate a more competitive market, he argued, all petroleum companies should have non-discriminatory access to the nation’s oil terminals and ports.

Despite opening up the domestic fuel market to new players, the majority of Mexico’s petroleum infrastructure is still controlled by the state oil company Pemex.

The average price of regular — or Magna — gasoline has risen 17% this year, according to the consultancy PETROIntelligence, from 16.24 pesos per liter at the beginning of January to 19 pesos. Prices were as high as 19.11 pesos on Friday in Guadalajara.

 

Mexico News Daily / Mileno / June 25

 

Rangeland Energy Begins Operations at its South Texas Energy Products System (STEPS) Terminal Facility in Corpus Christi, Texas

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Oil and Gas 360 / june 5

 

SUGAR LAND, Texas

Rangeland Energy III, LLC (“Rangeland”) today announced that operations commenced at its STEPS terminal in Corpus Christi, Texas, on Monday, June 4. Rangeland also announced that in June the company will begin loading diesel onto railcars for a leading refined products customer. The diesel will be delivered to third-party inland terminals in Mexico via the Kansas City Southern Railway(NYSE: KSU).

“Rangeland is looking forward to facilitating the transportation of diesel to destinations in Mexico for a major industry player,” said Rangeland President and CEO Christopher W. Keene. “This is the first customer to contract with us for services at the STEPS facility. As we continue to build out the STEPS project, we are working with other key marketers, refiners and producers to provide services into and out of STEPS.”

About STEPS

STEPS is an integrated hydrocarbon logistics system that receives and stores refined products, liquefied petroleum gas (“LPG”) and other hydrocarbons at a new terminal hub located in Corpus Christi, Texas, and transports them to terminals primarily located in Mexico. During the initial phase of the project, refined products and LPGs will be received in the Corpus Christi terminal then shipped to third-party inland terminals located in Mexico. In subsequent phases, marine facilities in Corpus Christi and Mexico will be added to the system, along with the infrastructure to accommodate additional commodities including crude oil, condensate and fuel oil. The STEPS project expands upon and leverages Rangeland’s successful track record of developing similar infrastructure in the Bakken Shale and Permian Basin.

The terminal site in Corpus Christi is strategically situated along the Kansas City Southern Railroad mainline within five miles of the Port of Corpus Christi and the Valero, CITGO and Flint Hills refineries. Inbound products initially will be delivered by truck or rail, followed later by pipeline and barge. Refined products and LPGs will move out of the STEPS Corpus Terminal primarily by rail, but the terminal could eventually connect to pipelines and vessels.

About Rangeland Energy

Headquartered in Sugar Land, Texas, Rangeland Energy was formed in 2009 to focus on developing, acquiring, owning and operating midstream infrastructure for crude oil, natural gas, natural gas liquids and other petroleum products. The company is focused on emerging hydrocarbon production areas across North America, with a current emphasis on the Gulf Coast and Canada. The Rangeland team represents more than 200 years of combined midstream experience and is backed by an equity commitment from EnCap Flatrock Midstream. Visit www.rangelandenergy.com for more information.

 

Oil and Gas 360 / june 5

 

Netherland Sewell Adds Mexico City to the 2018 Oil & Gas Property Evaluation Seminar Lineup

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Oil & Gas 360º / May 29

 

NSAI Oil & Gas Property Evaluation seminars coming to London, Singapore and Mexico City this summer

Netherland Sewell & Associates (NSAI) has again expanded the reach of its popular Oil & Gas Property Evaluation Seminars for financial professionals, with the new addition of a seminar in Mexico City on September 5-6, 2018.

“We are very excited to introduce the NSAI Oil & Gas Property Evaluation seminars to Mexico,” said NSAI SVP & CFO Scott Frost. “With the country opening its hydrocarbon sector to foreign investors and international partners, the time is right for NSAI to host a seminar in Mexico.”

Seminars deliver a basic understanding of the upstream oil and gas industry

The two-day seminars are designed to help energy finance professionals gain a deeper understanding of the various aspects of the evaluation of hydrocarbon reserves and learn how to use reserves reports and studies.  Participants can expect to gain a basic understanding of the upstream oil and gas industry, including basic geology of different plays, reservoir evaluation basics, reserves and resources definitions, understanding hydrocarbons-in-place, recovery factors and rates, operating expenses and capital costs, and more.

The seminar speakers are NSAI professionals that have significant career expertise in reserves determination methods, the economics of hydrocarbon extraction, and petroleum geology. The seminars are popular with financial institutions that invest in energy development as well as banks that are involved in making lending decisions for oil and gas exploration and production projects.

Below is the 2018 NSAI Oil & Gas Property Evaluation seminar calendar:

  • May 7 & 8 and 9 & 10, 2018 – Dallas (Both sessions had record attendance with a waiting list)
  • June 26 & 27, 2018 – London: Grange City Hotel
  • July 10 & 11, 2018 – Singapore: Singapore Exchange – SGX Auditorium
  • September 5 – 6, 2018 – Mexico City: Asturiano Polanco Banquet Room

NSAI encourages energy industry and oil and gas financial professionals to pass this information on to colleagues who may benefit from attending. “We are excited about the opportunity to meet again with petroleum industry financial professionals and would like to thank you for recommending our seminars to your colleagues,” said NSAI SVP Joseph Spellman.

Scott Rees, NSAI Chairman and CEO, told Oil & Gas 360® that the firm has graduated about 6,500 people during 38 cumulative years of seminars in Dallas, London and Singapore. “We are glad to be adding Mexico City to that list,” Rees said.

Interested parties may learn more and register at NSAI’s website.

 

Oil & Gas 360º / May 29

 

Mexico’s Billion Dollar Oil Industry Ripe for the Picking

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Baystreet Staff / May 22

 

It may have taken the better part of a century, but Mexico figured out that their state-owned energy monopoly, PEMEX, was a business model that just wasn’t working out. After hammering out legislation in 2013 to denationalize the nation’s oil and gas industry, the worst thing that could happen, did; oil prices collapsed, and companies globally hit the brakes on spending. What was expected to be the opening of floodgates to invest in arguably the biggest energy opportunity today didn’t happen quite as expected. With oil prices climbing to fresh three-and-a-half year highs, all that is changing and the Mexico’s oil space is starting to heat up with investment of $150 billion now secured.

As it happens, investors’ conservative approach worked perfectly in favor of Steve Hanson and his team at International Frontier Resources Corp. (TSX-V: IFR) . «We knew that we were heading to Mexico for the first onshore licensing round to build the cornerstones of our operations,» Hanson said in a phone call with Baystreet.ca. «We were in a strong financial position with a clear mission to become the next energy leader in Mexico. Others staying on the sidelines as oil bottomed in 2016 really worked to our benefit as a first-mover in Mexico’s energy reform.»

The savvy leadership at IFR, formed an equal partnership with a Mexican petrochemical giant, as a result, this Canadian company became the first foreign-owned joint venture (JV) and independent oil company to actively explore onshore opportunities in Mexico in over 80 years. Through its strategic JV, IFR is also the first foreign company to complete the regulatory review and drill onshore conventional oil in Mexico under license contract. You’d think it would have been a major like Halliburton (NYSE: HAL) or Baker Hughes (NYSE: BHGE) or Schlumberger (NYSE: SLB), companies that were already working in the area as service providers to PEMEX, but it wasn’t. It was a little $30 million market cap. company that was nimble enough to beat everyone to the punch.

«We weren’t afraid of the price of oil. Not even at the $40 per barrel that oil was fetching at the time; we knew we could still make money based on our expertise and interpretation of the geology,» said Hanson. «At $70 oil, we’re obviously excited with our position, » he added.

Confident for Good Reason

Hanson’s confidence isn’t unfounded. He has over two decades of well-grounded experience in finance and corporate development, serving as chairman and managing director at the award-winning equity money management firm Van Arbor Asset Management before selling it with a sizable payout to the ZLC Private Investment Management in 2008. Next he was the CEO and president of PanAsian Petroleum that was sold profitably to Ivanhoe Energy, shortly after Hanson took charge. Likewise, that was followed by serving as a director at Lion Petroleum, a company focused on oil and gas in East Africa which was then acquired by Taipan Resources.

IFR’s management team is the embodiment of success and has experience across the finance and energy spectrum throughout the globe, including COO and director Andy Fisher, who has a history of taking companies with negligible assets to robust oil and gas production. For instance, he founded Arcan Resources and grew it from no production to 4,000 barrels of oil equivalent per day (boe/d), before the company was sold to Aspenleaf Energy Ltd., in June 2015 for CDN. $300 million. He was also VP, international contracts and negotiation, at Pacalta Resources Ltd. («Pacalta») in Ecuador, where he helped in growing the company from 100 boe/d in production to roughly 45,000 boe/d. In 1999, Alberta Energy Co., the predecessor to EnCana’s (TSX: ECA) (NYSE: ECA), bought Pacalta in a deal worth approximately CDN. $1.0 billion!

For the sake of brevity, the profiles of everyone contributing to IFR’s future can’t be covered; however, it certainly is worth mentioning that Colin Mills, an independent director at IFR, has more than three decades of diverse international experience in power generation, including building two power plants in Mexico, which adds to the local advantage of IFR in terms of navigating the regulatory environment in Mexico.

The commitment and confidence of these individuals to IFR is best recognized based on the fact that insiders hold more than one-third of the company’s outstanding shares.

It’s this experience and dedication at IFR that led to the formation of Tonalli Energia, a 50-50 JV between IFR’s Mexican subsidiary, Petro Frontera S.A.P.I de CV, and Mexican petrochemical giant Grupo IDESA. As a first mover, the partnership and its in-country experience gives Tonalli a serious competitive edge to catapult it forward into becoming the next energy leader in Mexico.

The Tecolutla Project – Now a Producer!

Imagine every bit of oil in Texas was controlled by one company for the last 80 years. That’s a rough analogy for what has been going on in Mexico. It’s explored enough (both on- and offshore) to know that there are tremendous reserves, possibly comparable to the all-resilient Permian Basin, but woefully little with respect to extracting oil and gas. Right now, Mexico ranks as the Western hemisphere’s third largest oil producer and host of the fourth largest known oil reserves.

Those could be conservative positions in the future considering Premier Oil last summer made a major offshore discovery in a block next to Talos Energy and Sierra Oil and Gas that is estimated to hold in excess of one billion barrels of oil that possibly extend into the adjacent block. This was discovered through the first shallow water offshore exploration well drilled since denationalization. Shares of Premier rocketed higher with the find. «Few think of Mexico in the same terms as Saudi Arabia, despite the fact that Mexico has similar quantities of hydrocarbon resources,» argued a recent report published by Manhattan Institute for Policy Research. However, this is about to change with higher oil prices and growing investor interest.

Lending further credence to Mexican oil potential, IHS Markit thinks the country’s untapped Tampico-Misantla Basin on the east coast of Mexico could be one of the world’s next «super basins.» Part of the basin includes the massive Poza Rica oil field, estimated to contain 3.8 billion boe, and IFR’s Tecolutla project which has now commenced completion operations for its recently drilled TEC-10 well.

The Tampico basin is known to have geology similar to the prolific North American basins, with stacked conventional and unconventional pay zones. In fact, IFR recently drilled 138 meters of reef thickness at its directional evaluation, TEC-10 well. It is also known that such basins tend to have «halo» zones of tight oil (light oil that is easily produced) surrounding them, this may be supported by the limited amount of exploration that has so far occurred at Tecolutla.

Seven wells were drilled between 1956-1972, with a well with last recorded production rates in January 2016. IFR announced the completion of a successful workover of a legacy TEC-2 well which was tested for production for a total of seven days and far exceeded management expectations. The well reported an average flow of 125 barrels of oil per day which was more than 13 times higher compared to last recorded production on the well! Newly drilled TEC-10 is next to test for production rates which is the most exciting moment for IFR JV since its inception!

IFR was awarded the block in May 2016 with no cash payment, merely a royalty agreement which offered one of the most favourable terms in comparison to the royalties on other blocks offered during the bid round. Furthermore, Export Development Canada (EDC) backstopped IFR by putting up the company’s portion of the performance bond required by Tonalli, allowing the company to conserve its cash, while lending a great deal of validation to the project. IFR ended the first quarter of 2018 with $2.81 million in cash and cash equivalents and no debt.

The first drill rig penetrated the ground in April, reached depth of 2,453 meters total vertical depth and was cased for production testing this month which was a historic moment for the Mexican oil and gas sector. Several points stand out when looking at the disclosed results, namely the fact that visible oil was noticeable from the core and the fact that oil was hit at deeper levels than oil was ever produced in the zone historically, indicating the El Abra reservoir at Tecolutla could have greater volume than ever believed.

Moreover, IFR, via Tonalli, is using modern exploration technology at Tecolutla for the first time. IFR is using the first-ever 3D seismic data shot for the whopping 81-billion-barrel Chicontepec formation with the aim of helping better understand Tecolutla field.

The beauty of the rock, according to Hanson, is not just that it is apparently flush with oil, but naturally fractured as well, making horizontal drilling easy, without the need for fracturing that draw the ire of environmentalists. These characteristics mean that the drilling is low cost, to the extent that Hanson believes the company can produce profitably at a cost of less than $20-$25 per barrel.

The Upcoming Catalysts

IFR is presently working on production testing, continuing analysis of the wireline, image logs and core analysis, refining the 3D seismic model and identifying the next drill target. The JV is looking ahead to the second tender of Round Three of bidding for projects (scheduled for September 27, 2018). Given the surge in value that Premier Oil experienced with its find, any positive data regarding the initial drill hole underpinned by historic production, should energize IFR shares and likely drive the attention of the investment community.

«We started IFR and moved aggressively in Mexico with the purpose of building a billion-dollar company,» Hanson added during the call. He continued, «We are very proud of being a first-mover in what we believe is going to quickly emerge as one of the most vibrant energy markets in the world and we’re not going to relent in our efforts to build value just as we have with previous companies.»

It’s difficult to disagree with anything Hanson says. They have nailed all of their milestones so far and certainly have plenty of running room to add to their portfolio. They have an outstanding partner in Grupo IDESA, the backing of EDC, are fully-funded for the existing work program, all the necessary infrastructure is in place, and they have outstanding experience across the entire supply chain that should allow IFR to sell oil at a price that couldn’t be realized anywhere else in the Western hemisphere.

Now, if they just start to prove the oil and the economic viability of the resource as they believe, IFR should be off to the races as the company looks to notch the next major success in their already impressive accomplishments.

Disclaimer: Nothing in this article should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this article is not provided to any individual with a view toward their individual circumstances. Baystreet.ca has been paid a fee of four thousand dollars for International Frontier Resources Corp. advertising. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this article as the basis for any investment decision. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in this article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

 

Baystreet Staff / May 22

 

Expert questions BP’s drilling plans for offshore Nova Scotia

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The Canadian Press / The Chronicle Herald / May 15

 

An engineering expert and former oil industry consultant has raised the alarm on BP Canada Energy Group’s plans to drill off Nova Scotia.

“Given BP’s current proposals for exploratory drilling offshore Nova Scotia, the likelihood of an uncontrolled blowout exceeds the upper limits for tolerability of exploratory well drilling risks,” said Robert Bea in his risk analysis of BP’s plans.

Bea, who is professor emeritus at the Center for Catastrophic Risk Management at the University of California at Berkeley, has investigated catastrophes including the Columbia space shuttle explosion in 1987 and the blowout of a Deepwater Horizon rig owned by BP eight years ago.

“Based on the information provided by BP, the blowout risk is clearly not acceptable,” Bea said in an interview Monday.

Bea uses a complex risk assessment system that looks into factors such as the commitment of everyone involved in an operation to safety, from contractors to the company’s top managers. The company’s awareness of major risks and its technical and management ability to assess risk is also taken into account.

After applying these criteria to BP’s plans for offshore Nova Scotia, Bea said the risk of an uncontrolled blowout like Deepwater Horizon was high. Eleven rig workers were killed in the Deepwater explosion on April 20, 2010, in the Gulf of Mexico and it triggered the biggest oil spill in U.S. history at an estimated 4.9 million barrels.

In a decision in early April, the Canada-Nova Scotia Offshore Petroleum Board authorized BP Canada to do preparatory work in advance of its plan to drill an exploration well about 50 kilometres off Sable Island. The decision drew protests from groups, including the Council of Canadians, about the environmental risks associated with the project and the strength of the regulations that govern the offshore.

BP contends that if there was a blowout off Nova Scotia, there would be sufficient time to drill a relief well and to get access to equipment such as a capping stack to contain the situation. But Bea said he questions that optimism, based on the documentation he’s seen and his personal experience in assessing gas and oil projects.

The provincial and federal governments have denied that the project, which could see up to seven exploration wells drilled off the southeast coast of Nova Scotia over a three-year period, poses unacceptable environmental risks.

Premier Stephen McNeil has said he’s confident that BP would take the appropriate measures to ensure safety and environmental responsibility throughout the project. He said BP has taken strides to strengthen regulations since Deepwater.

Federal Environment Minister Catherine McKenna has said the project “is not likely to cause significant adverse environmental effects.”

Bea agrees there would be economic benefits for Nova Scotia but only if the project is done successfully.

“I don’t think it’s a case of we should do this at all,” he said. “I think it’s a case of if we choose to do this, we need to do it with the best available technology. Because the consequences of being wrong are too high.”

 

The Canadian Press / The Chronicle Herald / May 15

 

Qatar Petroleum to push ahead with expansion despite Gulf crisis

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From: REUTERS NEWS AGENCY / 8 Mayo

 

State energy giant continue with expansion strategy to be on par with oil majors, despite Gulf crisis embargo.

State energy giant Qatar Petroleum (QP) will push ahead with its production expansion and foreign asset acquisition strategy to be on par with oil majors, despite a regional political and economic embargo on Doha, its chief executive said.

Qatar is one of the Organization of the Petroleum Exporting Countries’ smallest producers but is also one of the most influential players in the global liquefied natural gas (LNG) market due to its annual production of 77 million tonnes.

«We are in Mexico, we are in Brazil, we are contemplating investing in the US in many areas, in shale gas, in conventional oil. We are looking at many things,» al-Kaabi said in an interview at QP’s headquarters in Doha.

«We are looking very critically at the United States because we have a position there. We have the Golden Pass that we are investing in,» he said.

Qatar Petroleum is the majority owner of the Golden Pass LNG terminal in Texas, with ExxonMobil Corp and ConocoPhillips holding smaller stakes.

Al-Kaabi said «depending on the project’s cost and feasibility» he expects to take a final investment decision on expanding the Golden Pass LNG by the end of the year.

«I’m not in the business of infrastructure. I’m not going to have a liquefaction plant only. It has to be something that will be linked with an upstream business that we would buy in the US so we need to be naturally hedged,» he added.

To maintain its dominance in the US and Australia, QP is cutting costs at home and seeking to expand overseas through joint ventures with international companies.

«We will always go with one of our international partners that we have business with here in Qatar,» al-Kaabi said. «Some of our partners want to divest, some of our partners want to acquire something together.»

QP is focusing on other opportunities in Mexico, Latin America, Africa and in the Mediterranean, he said. QP is also looking to enter Mozambique, where Exxon and Eni operate, he added.

Al-Kaabi said the share of overseas upstream production will be «a good portion» in the long term, but it will not compare with its share at home.

«Our strategy says we are going to expand in upstream business with a little bit of downstream that will be connected to some other businesses that we are doing and a few one-off deals in petrochemicals,» he said.

 

We are in Mexico, we are in Brazil, we are contemplating investing in the US in many areas

                                                                        SAAD AL-KAABI

 

From: REUTERS NEWS AGENCY / 8 Mayo

 

Mexico Opens Last Round Of Oil Bidding Before Election

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From: Oil Price / Oxford Business Group / 28 April 2017

 

The latest round of open bidding for exploration rights in Mexico’s energy sector received mixed interest, with two further rights sales to take place later in the year.

Of the 35 shallow offshore blocks on offer in the March 27 auction, 16 were sold, with the strongest interest seen in blocks in the Sureste Basin – in the south-eastern portion of the Gulf of Mexico – where all eight offerings found buyers.

Mexico’s state-owned oil producer, Petróleos Mexicanos (Pemex), won seven of the blocks on offer, one in its own right and six more in partnership with overseas energy firms.

Fourteen oil majors were pre-qualified to bid alongside 22 consortia. France’s Total was the biggest winner in the Sureste Basin, coming away with the largest share of three blocks coverin­­g a total of 2342 sq km. It received two of these as part of a consortium with Pemex, and one with BP and Pan American.

The Ministry of Energy estimates that developing and operating the 16 blocks will require investment of $8.6 billion over the lifetime of the deposits.

Related: How High Can Trump Push Oil Prices?

Overall response to the auctions was slightly muted, with local and international majors showing some caution when making offers, partly due to the upcoming presidential election in July 2018, which has sparked concerns about potential changes to energy sector policy and rising supply in the market.

Auctions for shale deposits set for September

Indeed, the March auction was the first of up to three rights sales to be staged this year, with the remaining two land bids scheduled for late July and early September. The former will cover a total of 37 contractual areas in Burgos, Tampico-Misantla-Veracruz and the Sureste Basin.

The September round of bidding will be particularly notable, as it will be the first time that development rights for shale deposits have been auctioned off in Mexico.

Depleting natural gas reserves and high potential for shale – the country has 545trn cu feet of technically recoverable sources of shale gas, according to the World Resources Institute – have driven Mexico to accelerate development of the industry.

Early last month the energy sector regulator, the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos, CNH), called for bids on nine blocks in the Burgos Basin – located in the state of Tamaulipas, in the north-west of the country – to be auctioned off in September.

The blocks contain an estimated 1.1 billion barrels of oil equivalent (boe), and winning bidders will have the right to conduct exploratory work for conventional oil and gas, as well as any shale deposits identified.

Energy reform supports private sector development

The successive rounds of auctions for exploration and production rights are the keystone of Mexico’s energy reform policy. Launched in 2013, the reforms ended Pemex’s upstream and downstream monopoly, and offer the country the potential to generate $1trn of foreign direct investment by 2040, according to the Mexican Association of Hydrocarbons Companies.

 

From: Oil Price / Oxford Business Group / 28 April 2017

 

 

 

 

Mexican Oil Giant Pemex Seeks Partners to Drill in 7 Southern Areas

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FROM: Sputnik News / 27 April 2017

 

MEXICO CITY (Sputnik) – Mexico’s state oil giant Pemex is looking for partners in joint ventures that will drill at seven onshore areas in the country’s south, the national hydrocarbons authority said Thursday.

Contracts for drilling in the states of Veracruz, Chiapas and Tabasco will be signed for a period of 35 to 40 years with a possibility of a ten-year extension, according to the National Hydrocarbons Commission.

Mexico has been overhauling its energy sector since late 2013. The reform ended almost 80 years of Pemex’s monopoly by allowing foreign investments and contracts with private businesses.

 

FROM: Sputnik News / 27 April 2017

 

Mexico’s Sureste Basin Returns To Super Basin Spotlight

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From: Hartenergy / 6 April

HOUSTON—The flurry of bidding activity from oil and gas companies willing to shell out millions of dollars for drilling rights in the shallow waters of the Gulf of Mexico (GoM) during Mexico’s latest bidding round showed there must still be something special about the Sureste (Southeast) Basin.

“I’ve never seen a structure like it in my career,” Mark Shann, subsurface director for Sierra Oil and Gas, said of Sureste during the AAPG’s recent Global Super Basins Leadership conference.

The multiplay basin, which includes prolific sub-basins such as Sonda de Campeche and Chiapas-Tabasco, spans about 65,000 sq km and is believed to hold 50 billion barrels of recoverable oil in the GoM’s shallow water and beyond. Its oil-prone prowess gained prominence in 1976 with Mexico’s game-changing Cantarell oil field discovery. Since then the basin has served as the main hydrocarbon-bearing province for Mexico, which is working to reverse declining production with global players eagerly chomping at the bit in search of oil.

RELATED: Southeast Basin Lures Oil Companies To Mexico’s Shallow Water

The historic Zama discovery made in 2017 by a Talos Energy-led consortium that includes Sierra and Premier Oil and another discovery—Amoca—by Italy’s Eni in 2017 have kept the basin in the spotlight, indicating it still has more to give. The Zama well, the first well drilled by the private sector since Mexico opened its doors to foreign investors, hit 170 m to 200 m (558 ft to 656 ft) of net oil pay in Upper Miocene sandstones. Initial gross original oil in place estimates ranged from 1.4 billion barrels (Bbbl) to 2 Bbbl.

Some would call it the rebirth of a super basin.

Shann said the basin—along with neighboring Tampico-Misantla—has all the qualities of a super basin.

“If you’re going to go into a super basin, you need at least one fantastic source rock and it has to be a mature source rock,” Shann said. He added that multiple reservoirs are also needed. “Having multiple reservoirs takes away the dependency of one reservoir working out or not, and you need seals to hold back hydrocarbons in their reservoirs.”

Having a diversity of traps is fantastic, he added, noting other attributes also define a super basin. These include having a regulatory framework in which to make the entire business work and super data, something Shann said Sureste Basin has plenty.

“Four years ago when we started our company we couldn’t get all seismic data from the country. Today you can access all the seismic,” Shann said. “You can access any well that is older than two years, and there are 39,000 wells in the country. The ability mine data and therefore to compete on an equal level playing field is hugely important,” especially for a small company competing against supermajors.

Sierra has picked up 11,000 sq km of wide azimuth data from Schlumberger and source rock is visible, he said. “The super data has really helped to underpin a story of success in one of the world’s greatest super basins.”

Today Sierra is focused mainly on Sureste, which Shann said extends beyond shallow and into deepwater.

The company said on its website that Sureste’s original oil and gas in place is about 220 Bboe, and the fact that it has numerous mature fields—including Ku Maloob Zaap and Sihil—and little reinvestment signals “significant opportunity for growth.”

Its reservoirs are associated with structural, salt tectonics, stratigraphic and combined traps, and the main structural styles include normal faulting with rotated blocks (Late Miocene-Holocene), salt cored anticlines and salt rollers and diapirs (Jurassic-Late Cretaceous), according to Mexico’s National Hydrocarbons Commission.

In terms of source rock potential, Shann said “we’re definitely in a super basin.” He spoke about how the Zama discovery shed more light on source rock thickness. Taking into account a conservative 50% migration loss among other factors, the company was able to determine the source rock must be about 200 m thick.

Shann said the company and its partners’ plan to test the Jurassic next year.

“Sureste is one of those amazing salt-related basins,” he added, speaking highly of the carbonate potential of the basin in Mexican waters and on the U.S. side. “I think we can still find some big carbonate fields in the Campeche Slope.”

Located about 37 miles offshore, Zama is between Eni’s Amoca appraisal well in the Lower Pliocene and Pan American’s Hokchi 2 in the Middle Miocene.

“Between the three of us, we’re exploiting different parts of this basin, which helps the industry’s understanding of the whole basin,” Talos CEO Tim Duncan told Hart Energy’s Oil and Gas Investor last summer.

RELATED: Talos Energy CEO Talks About Historic Zama Well

Talos, which will merge with Stone Energy, said in its March 15 fourth-quarter earnings release that the company is in the appraisal planning stages for the Zama-1 discovery. Zama-1 is located in Block 7 of the Sureste Basin at a water depth of about 165 m.

Other exploration opportunities exist, according to Talos.

Talos holds a 35% participating interest with Sierra holding 40% and Premier, 25%.

From: Hartenergy / 6 April

 

Energy Reform Could Generate $1T in Foreign Investment for Mexico by 2040

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FROM:  Natural Gas Intelligence / Ronald Buchanan / 19 de marzo de 2018

 

Mexico’s energy reform could generate $1 trillion of direct foreign investment by 2040, said leaders of the industry lobby, Mexican Association of Hydrocarbon Companies, earlier this month.

The association, known by its Spanish acronym Amexhi, was presenting its Agenda 2040, a huge volume that reviews the industry’s past, from its origins at the beginning of last century; the present, including current uncertainties; and a future through 2040 that would «transform Mexico.»

Amexhi President Alberto de la Fuente admitted that the investment goal is ambitious.

The Agenda presupposes that power and hydrocarbons would account for  4% of gross domestic product by the target date. And, de la Fuente emphasized, it would require accurate instrumentation of the reform’s precepts, «as well as the resolution of challenges that are a legacy of the previous model.»

The defense of the Agenda would require four watchwords, he added: «Steadfastness, competence, transparency and knowledge.»

Amexhi has taken pains to remain neutral during the current campaigns for Mexico’s July 1 presidential election.

«All the candidates have shown interesting elements in their policy statements,» said Enrique Hidalgo, president of ExxonMobil Exploracion y Produccion Mexico, and the coordinator of Agenda 2040.

Some of the industry group’s sympathizers, however, have claimed that the pronouncements of the current leader in the race, Andres Manuel Lopez Obrador, who helms the left wing nationalist Morena party, has been less than steadfast in support of the reform. They also claim that his proposal for new refineries show a lack of understanding of the industry.

At the moment, the No. 2 in the race is Ricardo Anaya, leader of the National Action Party, the traditionally pro-business PAN. But Anaya has yet to issue any policy statements on energy.

Anaya also has embraced policies of left-wingers with whom he has formed an alliance. With them, he signed a statement of «No to the gasolinazo» — the liberation of gasoline prices.

Running third in the opinion polls is senior technocrat Jose Antonio Meade of the incumbent Institutional Revolutionary Party, the PRI. Meade was hand-picked by President Enrique Pena Nieto.

Meade’s loyalty to the energy reform has not been questioned. However, his loyalty to Peña Nieto has so far placed a political millstone around his neck. Pena Nieto is said to be the most unpopular Mexican president since political opinion polls were first published in the nation late in the 20th century as its democratic era began to dawn.

The democratic dawn has begun late for the former state monopolies of oil and natural gas, Petroleos Mexicanos (Pemex) and power, Comision Federal de Electricidad, the CFE.

Neither is free to set a budget, as Congress and the Finance ministry keep a tight grip on their spending. The Pemex and CFE unions, particularly that of Pemex, have corporate powers that go well beyond the defense of the interests of the workers in terms of pay and conditions.

The challenge are considerable, said senior analyst Arturo Carranza of Mexico’s National Institute of Public Administration. But, he added, the rewards are realistic.

Agenda 2040 proposes 15 bid rounds to lease oil and gas acreage. Since the 2013-14 reform was enacted, there have been two rounds featuring eight separate completed lease auctions. Three auctions are currently underway for the third round.

«But the pace has been stepped up and it can be pushed further,» Carranza said. «The country’s potential is beyond question for the industry. And the government has to do its part by identifying opportunities that the companies can grasp. In return, it can reap the benefits, such as royalties, on behalf of the nation.

«At the same time, the government has to cast off the restrictions on the budgets of Pemex and the CFE,» he added.

De la Fuente said at the presentation that about 80% of the nation’s oilfields are currently in decline, «but the best tool that’s available to revert the trend is the energy reform.»

 

 

FROM:  Natural Gas Intelligence / Ronald Buchanan / 19 de marzo de 2018