Mexico stays the course on the opening of its hydrocarbon sector
HOUSTON -- Mexico’s historic opening of its oil and gas sector to private investment, which began three years ago, continues on pace, and only a few phased moves remain to be completed, said a top governmental official. Speaking to a topical breakfast crowd on Monday morning during Day 1 of the Offshore Technology Conference (OTC), Mexico’s Deputy Secretary of Energy for Hydrocarbons, Aldo Flores-Quiroga, said that “this year, basically, we will be done with opening everything.”
And Dr. Flores-Quiroga remained unfazed and unflappable during a question-and-answer session with the crowd, even when a reporter for a national U.S. publication seemed determined to pick at the deputy secretary for a more negative reaction, in an effort to generate a more sensational headline. The reporter asked Dr. Flores-Quiroga whether the Mexican government regretted starting the opening of the hydrocarbon sector in 2014, just before oil prices cratered, and then continuing the process, along with bidding rounds, while oil prices remained low, ensuring that Mexico would receive less revenue from these efforts.
To his credit, Dr. Flores-Quiroga avoided taking the bait from the reporter, responding with a calm but firm observation. “Few governments attempt a reform of this size during high prices, and even fewer do it at lower prices,” said the deputy secretary. “Yet, we continue to proceed. We are doing this, because it makes sense, no matter what the price.”
During his main presentation, before the momentary theatrics of the Q-and-A session, the Mexican official made a compelling case for an increase in his country’s E&P activity, particularly in the deepwater areas. “What makes Mexico special? It is resources and cost,” stated the deputy secretary, as he trumpeted the country’s oil and gas potential, while also pointing out that it is a reasonably inexpensive place to do business. He touted Mexico’s 2P resources, which total 17.792 Bboe. Of that amount, 84% belong to national firm Pemex, while 16%, or 2.873 Bboe, belong to the state. Of the latter amount, 90%, or 2.601 Bboe, are available for privately funded exploitation.
Other positive aspects highlighted by Dr. Flores-Quiroga include the world’s 12th-largest economy, the 12 Free Trade agreements held by Mexico with 46 countries, and the nation’s transparent regulatory framework, which is promoting access to hydrocarbons. The deputy secretary noted that thanks to the historic Round One auctions of onshore and offshore blocks and fields, 48 private companies (26 of which are Mexican firms) are now participating in the oil and gas sector. Those firms are expected to invest a combined $49 billion in Mexico’s E&P activity, with 86% slated to go to deepwater projects, while 12% will go to onshore work and 2% are set for shallow-water tracts.
“Mexico is poised to take full advantage of its untapped deepwater offshore potential,” said Dr. Flores-Quiroga, who pointed out that 2,366 platforms exist in U.S. federal waters, while only 46 wells have been drilled in Mexican federal waters. Accordingly, the government has formulated a new five-year plan that eventually will offer up 509 E&P blocks and 82 production fields for all offshore and onshore areas.
Included in that plan are 119 deepwater blocks that are open for nomination. The nominations will complement technical analyses, prior to block selection. “We expect to present another deepwater round (Round 2.4) by December, said the deputy secretary. “Prospective resources in the 119 deepwater blocks equal 6,594 MMboe.” Average deepwater block size is 1,000 km2. He added that there are 112 shallow-water blocks, and the government expects conduct another offering (Round 3.2) in October 2018.
In addition, officials will, from this point forward, conduct two offerings of blocks per year. During the first half of each year, shallow-water and onshore conventional blocks will be offered for leasing. And then, during the second half of each year, deepwater and onshore unconventional blocks will be put up for bidding. “More areas will be open for nomination, as new information becomes available,” concluded Dr. Flores-Quiroga.
