Mexico's subsurface presents new E&P opportunities

Accumulations of extra heavy oil in carbonates on several structures in the extension of Mexico's Southeast basin will require economically viable EOR methods to improve the flow of oil.

The rest of Mexico´s deepwater and ultra-deep water gulf will probably be open for rank exploration. Geochemical analysis of seeps and water bottom samples together with hydrocarbon systems analysis of regional seismic lines led Pemex to identify numerous leads with prospective resources assessed at 26.6 billion boe. Pemex has drilled several dry holes in this region that will serve as lessons learned. In addition, companies will be hard pressed to reinterpret the seismic, especially around and beneath salt, in order to turn these leads into new play discoveries.

Southeast basin

Analysts predict Pemex will maintain control of the country's most productive area, the onshore and offshore portions of the Southeast basin. Opportunities for this region will come in the form of joint ventures, farmins, and service contracts to help Pemex produce an estimated 12.3 billion boe of undeveloped reserves.

This region is known for its triple permeability system, which can require extensive enhanced oil recovery methods to contend with intense fracturing, vugs, and microporosity in carbonates. The upside potential of this region is the 20.1 billion boe of prospective, yet-to-be-found resources, which is demonstrated by recent major discoveries of light oil and gas onshore and in shallow water off the state of Tabasco. Drilling design and operations are major obstacles for this area and will require application of high-temperature, high-pressure (HTHP) technology. Due to high reservoir temperatures and pressures, major blowouts have occurred in the recent past.

Mature oil fields

Historical producing trends of the Tampico basin (onshore and offshore) and the western margin of the Veracruz basin are where mature Mesozoic carbonate fields will likely be relinquished by Pemex. In fact, Pemex has already farmed out several mature fields in the Tampico basin under various types of service contracts. The difficulties here are management of high water cut, finding and injecting CO₂, and applying other enhanced oil recovery methods.

Another mature oil province is the Salinas basin in the south where Upper Tertiary sands onlap and overlie young salt domes. One of the salt dome fields has already been farmed out under a previous service contract. Finding new discoveries in this region will require deep seismic imaging both close to salt domes and underneath salt overhangs. Produced-water management will also be difficult for these partially depleted shallower reservoirs.

Gas basins, unconventional resources

Including Mexico's prospective shale basins, there are four nonassociated gas-producing basins in Tertiary sand reservoirs.

Pemex will relinquish areas of the Burgos and Sabinas basins that are currently not farmed out under previous service contracts. Here, potential operators will face partially depleted sands and heightened security concerns.

The Veracruz basin will be opened by Pemex on a joint-venture basis. The company's seismic amplitude exploration has creamed the Upper Tertiary sand opportunities, leaving potential for deeper, seismically transparent, higher risk leads to be evaluated.

The Macuspana basin will most likely be opened for development, but because most of the exploration opportunities lie beneath environmentally sensitive wetlands (Centla) local protests may hinder development.

The tight sand Chicontepec play in the Tampico basin features oil in thin-bedded, low-permeability sands, where per-well recoveries have been meager and only marginally economic. Recent pilot tests on small blocks assigned to service companies have demonstrated that horizontal drilling and hydraulic fracturing techniques can improve well performance by an order of magnitude.

Three large areas in the play have been recently farmed out under service-contract terms. The remaining play will no doubt be opened up for licenses. The difficulty will be to reduce drilling and completion costs sufficiently to make this play economic.

An assessed 60 billion boe of shale oil and gas resources lie in four areas: the extension of the S. Texas Eagle Ford trend into northern Mexico and the Upper Jurassic organic-rich shales in the Sabinas basin, the western margin of the Burgos basin, and in the Tampico basin. Pemex has been carefully testing the potential of these areas with pilot wells but so far have been unable to demonstrate viable economics.

As the company lacks the required expertise, these plays will probably be licensed out. The problem for newcomers will be to locate the sweet spots for hydrocarbon liquids, avoiding the gassy and less prolific areas, in order to apply their technological experience profitably.

The remaining onshore areas of Mexico are unlikely to be offered at this time. Pemex undertook a diligent exploration effort in the 1980s and 1990s, including drilling several wildcats, but no new hydrocarbon-producing provinces were found.

The attractiveness of entering an area where only one company has been undertaking exploration and production activities for 56 years is undeniable. With such large undeveloped reserves and considerable yet-to-find resources, Mexico is one of the few major new venture opportunities for companies interested in conventional and unconventional hydrocarbons. There is enough variety of geological targets, technology niches, and contractual terms to whet the appetites of most operators, investors, and service providers .

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. At present he is involved in developing E&P business opportunities in Mexico. He holds a BS from the University of Birmingham, UK. He is also an active member of the American Association of Petroleum Geologists and the Houston Geological Society.