Mexico’s Deepwater Find Is A Big Deal. Here’s Why…

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October 5, 2012

MEXICO CITY–Mexican state oil monopoly Petroleos Mexicanos, or Pemex, has found a second big crude-oil deposit in the deep waters of the Gulf of Mexico, President Felipe Calderon said Friday, suggesting huge petroleum resources on the mostly unexplored Mexican side of the waterway.

The new find supports “the hope or the idea that on the Mexican side there are petroleum deposits like the ones already found on the U.S. side,” Mr. Calderon said at a news conference. Along with a previous oil find announced in late August, and information from seismic studies, the new discovery suggests “the existence of a petroleum system of enormous proportions,” the president added.

The new find should allow Pemex to book oil reserves of up to 125 million barrels, using the broadest measurement of proven, probable and possible, or 3P, reserves, Mr. Calderon said. The exploratory well is 250 kilometers east of the Gulf port of Matamoros and 40 kilometers south of Mexico’s maritime border with the U.S.

The well, drilled in 2,900 meters of water, is the deepest Pemex has ever drilled and one of the deepest in the entire Gulf, the president said. The deposit of light, sweet crude oil was found another 1,100 meters below the sea floor, he added.

The latest discovery follows Pemex’s first big oil find in the deep waters of the Gulf, where the oil company has limited experience.

The first find was in the Perdido area of the Gulf that is shared with the U.S. and is already being exploited on the U.S. side. At Perdido, Pemex drilled in 2,500 meters of water and said it expects to book between 250 million and 400 million barrels of 3P crude reserves.

Mr. Calderon cautioned that exploiting deep waters would take many years and huge investments, but it opens up a new era for Pemex since the deep-water Gulf may hold as much as half of Mexico’s oil reserves.

Preliminary evidence suggests that both exploratory wells were drilled in much larger structures that could contain billions of barrels of oil, potentially, and could represent 10 years of Mexico’s output at current levels, Mr. Calderon said.

Pemex oil production has been falling for eight straight years, from a peak of about 3.4 million barrels a day in 2004 to about 2.55 million barrels a day currently. Most of the fall has come from declining output at the super-giant Cantarell complex in the shallow waters of the southern Gulf.

Mexican energy officials have said for years that the days of “easy oil” are over for Pemex and that it has to aggressively go after more difficult resources as international oil majors have done in deep waters around the world.

Mr. Calderon said Friday that the recent oil finds in the deep-water Gulf “ratify the strategy and the benefits” of Pemex ramping up its Gulf exploration.

The president, whose term ends Dec. 1, failed to pass his version of an energy bill in 2008 that would have allowed Pemex to partner with oil majors in Gulf exploration and production, which is the model often used on the U.S. side to pool capital and share the risks of pricey exploration and production activities.

Incoming President Enrique Pena Nieto has said that he will soon propose an energy bill that will allow more private investment in the energy sector, and analysts have suggested that shared-risk contracts for unconventional sources of oil, such as in deep waters, could be part of a new energy proposal.

-By Laurence Iliff. (c) 2012 Dow Jones & Company, Inc.

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