Mexico's Perdido heads to become a prime producing region despite political changes
By Daniel Rodriguez / Platts
Petroleumworld 03 08 2019
Despite the suspension of Mexico's upstream auction rounds by newly elected President Andres Manuel Lopez Obrador, enough acreage has already been licensed at the deepwater Perdido Foldbelt to turn it into a premier oil and gas producing region.
Perdido is key for Mexico's future oil production as giant shallow water fields like Cantarell and Ku-Maloob-Zaap are in their terminal phase. Mexico's produced 1.6 million b/d in January, half of its peak historical output in 2003. S&P Global Platts Analytics estimates this will grow to 1.8 million b/d by 2030.
CNOOC, Shell, Total, BHP, ExxonMobil, Chevron, Inpex, PC Carigalli, and Qatar Petroleum hold acreage in Perdido after auctions held by the previous Mexican administration.
Mexico's National Hydrocarbon Commission (CNH) projects Perdido's production at 440,000 b/d of oil equivalent by 2030. Consultancy group WoodMac forecasts it at 500,000 b/d in the early 2030s based on estimates of yet to be found resources.
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Historically, activity in Perdido was limited because of Pemex's limited resources and the country's former state monopoly, Pablo Zarate, director of Mexico City-based think tank Pulso Energetico said.
"Operators are moving rapidly and in some cases faster than contractually required to evaluate this play," Zarate said, whose organization is backed by Mexico 's Upstream Operators Association, or AMEXHI.
OVER 9 BILLION BOE OF PROSPECTIVE RESOURCES
BHP, Total, ExxonMobil, CNOOC, PC Carigalli, and Pemex will drill a combined seven wells in Perdido in 2019. In addition, Shell has pledged to drill seven wells as soon as CNH approves its exploration plans for five blocks, which could be in 2020-21.
"Perdido has enough pledged wells today for the whole play to be de-risked and generate economies of scale and synergies," Zarate said,
The Mexican government awarded enough acreage to make Perdido a dynamic region for years to come, Alma America Porras Luna, CNH's interim president commissioner, said.
According to Porras, companies can hold deepwater acreage for up to 15 years as long as they actively explore the area under CNH's approval.
CNH estimates Perdido's total prospective resources at 9.2 billion boe. Pemex holds 41% of this, private companies 42%, and the remaining lies in unlicensed blocks.
BHP, Total, ExxonMobil, CNOOC, and PC Carigalli have identified alone 4 billion of prospective resources across a handful of potential targets.
A key element in Perdido's future is Pemex's participation. The company has to return to the government Perdido acreage assigned during round zero. Lopez Obrador has said Pemex will not continue operating in deepwater due to its high cost and lengthy development time.
"We expect Pemex's position towards Perdido to be defined in the second half of 2019," Porras said.
The Perdido could hold up to 12 different potential exploration targets, William Turner, a WoodMac senior research analyst, said.
"We could see many collaboration opportunities as the share of capital needed to assess all this acreage is massive," he added.
THE POTENTIAL TO BE A PRIME PRODUCING REGION
What makes Perdido attractive is the extension of the Wilcox formation from the US into Mexico.
Operators in Mexico's Perdido can bring the lessons they acquired from developing deepwater lower tertiary projects in the US, Julie Wilson, WoodMac's global exploration research director, said.
"This is one of the most closely watched exploration areas in the world right now," Wilson said.
Pemex has drilled 29 wells in Perdido's lower tertiary formation with a 65% geological success rate. Of these, 11 wells are considered commercially successful, CNH data reveals.
The large presence of salt is the wildcard in the Perdido, Wilson said. This can create a good hydrocarbon trap but also brings seismic and drilling challenges.
CHALLENGES FOR DEVELOPMENT
Natural gas marketing and development costs could also cap Perdido's potential, Maria Cortez, a WoodMac senior research manager, said.
"If Perdido is analogous to the US Deep Gulf, it is expected that a significant amount of gas will be produced in this region," Cortez said.
Companies need to make discoveries big enough to be able to market the gas alone.
"If not, a hub-like development will be needed to bring multiple discoveries online," she added.
Higher gas outputs make development more costly, as it requires floating production, storage and offloading units with higher specifications, Cortez said.
Companies would need to find fields with a production cost under $50/b to make projects viable, Turner said.
Shell has set the bar for deepwater projects, Turner said. The company recently approved its US Vito project with a $32/b production cost.
Shell achieved this by contracting construction during a low oil price environment. It is yet to be seen if similar low deepwater production costs can be obtained under a high oil price cost cycle, Turner said.
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