Mexico may Trim Pemex's Oil Field Wish List

Source: Reuters 3/26/2014, Location: South America

Mexico's energy ministry aims to find a middle ground between strengthening state-run oil company Pemex and ensuring major opportunities for new private producers under a landmark energy overhaul, a top government official said.

Under the overhaul, which aims to boost Mexico's oil and gas sector, the ministry must determine which fields Pemex will keep via a so-called "Round Zero" allocation.

Pemex submitted its wish list last week, and now the ministry has until mid-September to decide.

"We have to strike this balance between what Pemex keeps and what the nation keeps to tender to new participants," Lourdes Melgar, deputy minister for hydrocarbons, told reporters.

"We want a strong Pemex," said Melgar, who along with the country's energy minister, sits on Pemex's board of directors. "A vision that aims to shrink Pemex would be very negative and is not an option."

Once Round Zero is complete, Mexico will launch an international bid round for oil and gas development rights each year through 2019, each one covering about 20,000 sq km, she said.

Details of Pemex's list have not been made public, but the oil ministry said Pemex seeks 83 percent of its proven and probable oil reserves and 31 percent of its less-certain prospective resources, which includes its shale and deep-water potential.

Mexico is believed to have 26.6 billion barrels of oil equivalent (boe) in its territorial deep waters, and Melgar said Pemex is looking to keep 29 percent, or about 8.1 billion boe.

The Perdido Fold Belt, a major deep-water oil deposit that straddles the two nations' maritime border in the Gulf of Mexico, will test the balance, Melgar said.

While hundreds of wells produce more than 1.3 million barrels per day (bpd) on the U.S. side of the Gulf, Pemex has no commercial production despite several successful test wells.

Melgar anticipates "great interest" when Mexico launches future bid rounds to auction off rights to Perdido blocks, given existing pipeline and other processing infrastructure in nearby U.S. waters.

She emphasized that seismic studies conducted there by Pemex does not demonstrate sufficient capacity to award Pemex all the Perdido acreage it wants.

Melgar said it is "most likely" that the ministry will approve Pemex's request to keep its shallow water acreage, where the company has shown results over decades of development.

"We're thinking Pemex will keep some of Chicontepec, but we will have to see if it keeps everything it's requesting," she said. The Chicontepec basin is located in the eastern states of Veracruz and Puebla and is home to about 40 percent of Mexico's certified reserves.

Melgar said Pemex's request to keep 15 percent of Mexico's estimated shale resources, or about 8.9 billion boe was reasonable. She stressed, though, that the company had yet to show results in that area.

To date, Mexico has drilled 175 shale test wells, which compares with more than 13,000 permits issued for shale wells in the Eagle Ford formation just across the country's northern border in southern Texas.


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