HOUSTON (Reuters) - Mexico’s state-run Pemex [PEMX.UL] might bring partners into two heavy crude oilfields in the Gulf’s shallow waters, the company’s chief said on Tuesday, a move that could help ease a lack of heavy barrels in the Atlantic basin.
After nine bidding rounds in just three years and with a presidential election scheduled in July, Mexico’s oil regulator has started a campaign to convince Pemex and foreign investors that this is the moment to develop much needed extra-heavy oil reserves.
“We are looking to increase production, including heavy crude, so we might put on the table some farmouts mainly for those fields that need secondary recovery strategies,” Pemex CEO Carlos Trevino said at a news conference during the CERAWeek energy conference in Houston.
“The name of the game in Pemex right now is partnership,” said Trevino.
On Monday, he said Pemex will look for partners for two deepwater blocks it just won in a January auction. He also said that this year the company will offer partnerships for its offshore projects Nobilis-Maximino and Ayin-Batsil, which failed to bring foreign capital last year.
The company also expects to form joint ventures at seven onshore projects recently submitted to the regulator to be put on the auction schedule, and plans to convert up to 22 service contracts into farmouts and other contracts.
The heavy oilfields of Ayatsil and Tekel could be offered after that, Trevino said. He did not elaborate on the specific timing.
Mexico’s heavy oil activity is currently concentrated in the Pemex-operated Ku-Maloob-Zaap region in the Bay of Campeche, which produces 850,000 barrels per day (bpd), nearly half of the country’s output. The volume is expected to start declining in the coming year, according to the National Hydrocarbons Commission (CNH).
Besides the mostly undeveloped Ayatsil and Tekel fields, operated by Pemex at the center of its drilling activities in the Gulf’s shallow water, the Mexican government has in its portfolio two adjacent areas, Pit and Kayab, CNH chief Juan Carlos Zepeda told Reuters. He said these also could be offered in a bidding round.
“It’s key that Pemex moves forward to farmout first as they have the largest and only operative field,” Zepeda said.
Pemex exploration chief Jose Antonio Escalera said the auction could choose to have Pemex alone farm out its two oilfields, or offer the cluster of four fields along with the government. But talks have not started between Pemex and the regulator to decide that, he added.
The whole heavy cluster has recoverable reserves of more than 3 billion barrels with nearby infrastructure to transport and export the crude.
“Heavy sour” no longer means cheap, unwanted oil barrels. Heavy versus lighter oil price differentials in the Atlantic basin have narrowed in recent months due to falling exports by traditional suppliers Mexico, Ecuador and especially Venezuela, whose output fell in 2017 to its lowest in almost three decades.
The only Latin American country consistently supplying the Atlantic with incremental volumes of crude is Brazil, whose new production coming from its vast deepwater reserves is mostly composed of medium sweet grades, not exactly what U.S. Gulf refiners need the most.
“We cannot leave our market to the Canadians,” Zepeda said.
Canada’s heavy oil exports have partially compensated for the lack of supply from Latin America, but transportation constraints often make it difficult for some Canadian producers to offer barrels to U.S. Gulf refiners at attractive prices.
The CNH estimates that Ayatsil, Tekel, Pit and Kayab could start producing about two to three years after being awarded.
Reporting by Marianna Parraga; Editing by Paul Simao, Lisa Shumaker and David Gregorio