Colin Stabler
Consulting Geologist
Mexico City
Petroleos Mexicanos officially tendered in early March 2011 for the redevelopment of mature and abandoned fields in three separate blocks onshore the southern state of Tabasco under a recently approved performance incentive service contract.
When applied to the blocks, this first round boils down to a 2-year seismic option. That is after a 2-year evaluation phase, including seismic, the operator has the option to back out.
This summary, based on the pre-bases,1 outlines the technical opportunities and risks for each block, as well as the main contract terms, so that companies with specific experience or niche technologies can ascertain their interest in evaluating data packages and competing in the upcoming first round.
The hydrocarbon reserves identified by Pemex in each block, given the contract terms, may be insufficient to interest all but niche-player operators. New 3D seismic surveys and reprocessing during the evaluation phase may identify sufficient new reserves to justify exercising the option to proceed to the 23-year redevelopment phase.
Magallanes block
The Magallanes block contains two fields in a complex of Upper Tertiary, multiple, fair to good quality reservoir sands and fault blocks lying at 2,000-3,500 m above and flanking salt intrusions. The total remaining oil and associated gas reserves that Pemex has identified amount to 110 million bbl of oil equivalent.
Redevelopment of the main field, the very mature, 63-year-old Sanchez Magallanes field, which presently produces 6,833 b/d of 31-34° gravity oil and 13.6 MMcfd of gas from 54 wells, will face issues with the wells, including sanding up, plugging with paraffin, and damage from the extensive waterflood. In addition, the study and surveillance of at least 160 separate pools will be a challenge to manage efficiently as it will likely tie up considerable staff time.
The other field in the block, Otates, has few remaining reserves.
The opportunity is to increase the block's reserve base by reprocessing 2005-vintage 3D seismic to search for infill drilling locations, recompletion intervals, and deeper exploration targets. However, improved imaging of the 3D seismic may be hindered by incomplete acquisition coverage, so a fresh 3D seismic survey may be required.
Santuario block
The Santuario block contains three fields in Upper Tertiary, multiple, good-to-fair quality sands lying at 2,950-3,600 m in fault traps on the crest of a major rollover anticline. The total remaining reserves of oil and associated gas that Pemex has identified amount to 44.5 million boe.
The two main fields are mature, 43-year-old El Golpe and 47-year-old Santuario, which together presently produce 6,742 b/d of 35-36° gravity oil and 3.81 MMcfd of gas from 34 wells. The third field in the block, Caracolillo, is abandoned and has no identified remaining reserves.
The opportunity is to increase the reserves on the block by acquiring two mini 3D seismic surveys (17 sq km and 10 sq km) and integrating with the existing 3D seismic to identify new drilling locations and recompletion intervals.
Carrizo block
The Carrizo block contains just one field, Carrizo, with its Upper Tertiary sands lying at 1,400-2,200 m on a shallow, faulted gentle anticline that has been abandoned due to lack of funds.
Its remaining possible oil and associated gas reserves are 51 million boe. It is unclear how much of these reserves are heavy oil (18-22° gravity) and how much is extra heavy oil (7-12° gravity) in shallower sands of excellent quality overlying the field.
The opportunity is to increase reserves by acquiring a mini 3D seismic survey over the unsurveyed 40% of the field and integrate it with the existing 3D seismic to identify more drilling locations and recompletion intervals. The extra heavy oil could present an additional opportunity to install an thermal enhanced recovery project.
Other contract terms
The contracts on all three blocks offer the option to expand, reduce, or relinquish a block depending on the results of a 2-year evaluation phase.
If the option to proceed into the 23- year redevelopment phase is exercised, new production (above a preestablished decline curve) will be paid for on a fee-per-barrel basis (the biddable item) taking into account performance factors such as cost reduction, accident prevention, and value added.
In addition, management fees will be paid for old production (below the preestablished decline curve) at 21% of the fee-per-barrel and for handling hydrocarbons produced outside the block at 10% of the fee-per-barrel.
An additional fee and cost recovery for newbuild infrastructure will be allowed. The mature fields will receive tax rebates on a per barrel of new production basis, to be defined case by case.
However, limitations are that the reserves cannot be booked; the payments are limited by the net cash flow of the project and capped indexed to oil price; only 75% of costs can be recovered (but can be rolled over into the next period); a minimum of 40% national content is mandated, and funds need to be put aside for abandonment.
Also an extensive environmental baseline study will be required, and many of the surface facilities are old and cannot be expected to last the 25-year term of the contract without extensive maintenance.
Pemex has a back-in working interest of 10%, which will be taken up by a subsidiary. This represents a potential conflict of interest in that Pemex will approve the operator's annual budget and work program. Red flags are community risk (Pemex operations suffer from demonstrations and shutdowns from farmers and fishermen) and security risk (Pemex staff have been kidnapped recently).
Reference
1. (www.pep.pemex.com), Contratos Incentivados, Campos Maduros, Region Sur.
The Author
Colin Stabler ([email protected]) is a consulting petroleum geologist retired from Shell in Mexico City. He has worked Mexican subsurface geology since 1966, first as part of a British consulting group, and more recently as Shell's E&P representative in Mexico. Presently, he is active in Mexican E&P affairs and keeps abreast of upcoming opportunities
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