Paula Dittrick
Senior Staff Writer
HOUSTON, Mar. 18 -- Petroleos Mexicanos (Pemex) has launched a process designed to draw operators and service companies from outside Mexico to the Burgos basin under multiple service contracts (MSC).
Pemex opened electronic and physical data rooms to show information on eight blocks of varying size that cover a combined 13,300 sq km along the Rio Grande River. The company said the blocks involve both exploration and development opportunities.
Bidding likely will start sometime this summer, but Pemex has not announced a timetable. A number of key decisions on terms and procedures are still to be made.
The MSCs, which remain controversial within Mexico, are long-term contractor agreements in which the MSC contractors are paid a set price for services and work performed. Available information indicated the MSCs will range in duration from 8 to 15 years.
Viewing the data
Companies interested in bidding may or may not need to travel to Mexico, said Sergio Guaso, executive director, MSC Project, Pemex Exploration & Production.
"In this phase, before the bidding process, basic information is available through two methods. Interested companies can request an appointment to visit the physical data room in Reynosa, Mexico, or they can register to view and evaluate logs, production information, and seismic information via the online data rooms on the IndigoPool web site," Guaso said.
IndigoPool, a Schlumberger Ltd. company, won the contract to host both rooms. Schlumberger has been working with Pemex since the 1930s, said Jeremy Walker, IndigoPool president.
The web site went online Feb. 17, and by Mar. 18, 170 people from 111 companies had viewed the 35 gigabytes of data. IndigoPool alerted these people to the site. It also held a February meeting in Houston to discuss its plans with selected oil and gas companies, Walker said.
The data available on IndigoPool show some 2D seismic surveys, well data, and production history. There is no payment required to view the initial data online, and companies do not have to already be IndigoPool clients in order to see it.
Interested companies do have to register on IndigoPool to reach the site, then sign the guest book on the Pemex page, and then request access, normally granted within 24-48 hr.
For more detailed seismic data and well logs, interested parties can agree to purchase an additional information package, the price of which has yet to be established.
Even the physical data room will involve electronic files, and visitors to Reynosa will be able to ask questions of Pemex officials there. But visitors will not be able to leave with paper copies of that information because it must stay in Mexico, Walker said.
Burgos blocks
Here is a list of blocks by number, name, and size:
Block 1 Ricos - 42 parcels - 2,983 sq km.
Block 2 Reynosa Huizache - 26 parcels - 690 sq km (northern block) and 1,162 sq km (southern block).
Block 3 Monterrey-Pascualito - 21 parcels - 1,700 sq km.
Block 4 Mision - 29 parcels - 1,891 sq km.
Block 5 Corindon-Reno - 21 parcels - 1,460 sq km.
Block 6 Pandura-Olmos - 66 parcels - 3,980 sq km.
Block 7 Cuervito - 3 parcels - 231 sq km.
Block 8 Fronterizo - 3 parcels - 231 sq km.
Each block has a list of desired services such as well operations, pipeline maintenance, exploration goals, and development goals. Foreign companies will be working only in areas where Pemex reserves have been certified by Netherland, Sewell & Associates Inc., Dallas. The producing blocks have from three to several hundred wells.
Aspects of MSCs
Mexico's constitution prohibits foreign companies from participating directly in Mexico's upstream sector, so the MSC participants will not own reserves.
They must sell all produced gas to Pemex, which guarantees to purchase it and provide transportation.
The contract gives companies some freedom to explore in Mexico, Walker said, adding that under MSC terms operators "actually are going to be paid for drilling dry holes," if that scenario should develop.
"The winning bidder will be the company that bids a discount," Walker said. "Operators will have to think like a service company. They must think in terms of bidding services to a discount."
An MSC contractor will make a profit by doing the job for less money than the amount that it took to win the bid. Foreign companies will not be able to book the reserves involved in the MSC, but they can count on guaranteed revenue.
Guillermo C. Dominguez Vargas, vice-president of technology and professional development at Pemex E&P, discussed the MSCs last year during a Mexican energy conference organized by the Center for Business Intelligence, Woburn, Mass.
Recognizing Pemex's own average domestic natural gas supply cost of $1.70/Mcf and a projected 2006 gas import cost of $3.69/Mcf, Dominguez Vargas pegged the future MSC supply cost threshold at $2.46/Mcf.
"The winner (of the MSC tender) would be the lowest off the ($2.46/Mcf threshold)," he said at that time (OGJ, Nov. 11, 2002, p. 30).
Other aspects
The MSCs have various objectives, one of which is to accelerate the production of plays already producing in South Texas such as the Frio-Vicksburg trend, Walker noted.
South Texas is geologically and geographically contiguous with the Burgos basin, providing insight into its potential (OGJ, Sept. 30, 2002, p. 46).
Other objectives of the MSCs are to:
-- Develop low-permeability fields.
-- Identify deeper basin developments.
-- Promote the drilling of wells to depths of 1,000-6,000 m.
-- Acquire a minimum of 6,500 sq km of 3D seismic data.
-- Construct the necessary infrastructure for production.
Walker said, "Despite the fact that some people may have preferred different fiscal terms, I believe a number of companies will take a crack at this as they may be looking at this as the entry fee (to Mexico's upstream). There is a tremendous interest. This is a way for companies to diversify their portfolios as there appears to be less price sensitivity with these MSCs.
"Pemex is saying you will not have to have a very large operation there, just local presence. They want to make sure you keep your costs down," Walker said.
Pemex is using the MacCleod, Dixon law firm and Pedro Van Meurs & Associates, a consultant familiar with world fiscal regimes, to write the MSC terms. Both are Calgary businesses.
Contact Paula Dittrick at [email protected]
