Pemex Invites Partners Offshore

by Marianna Parraga (Reuters) – Mexico’s state-run Pemex [PEMX.UL] might bring partners into two heavy crude oilfields in the Gulf’s shallow waters, the company’s chief said on Tuesday, move that could help ease a lack of heavy barrels in the Atlantic basin.

After nine bidding rounds in just three years and a presidential election scheduled in July, Mexico’s oil regulator has started a campaign to convince Pemex and foreign investors that this is the moment to develop much needed extra-heavy oil reserves.

“We are looking to increase production, including heavy crude, so we might put on the table some farmouts mainly for those fields that need secondary recovery strategies,” Pemex’s CEO Carlos Trevino said during a news conference during the CERAWeek energy conference in Houston.

On Monday, Trevino said Pemex was looking for partners for its deepwater Nobilis-Maximino and Ayin-Batsil projects.

It also expects to form joint ventures at seven onshore projects recently submitted to the regulator to be put on the auction schedule, and plans to convert up to 22 service contracts into farmouts and other contracts.

The heavy oil fields of Ayatsil and Tekel could be offered after that, Trevino said. He did not elaborate on the specific timing.

Mexico’s heavy oil activity is currently concentrated in the Pemex-operated Ku-Maloob-Zaap region in the Bay of Campeche, which produces 850,000 barrels per day (bpd), nearly half of the country’s output. The volume is expected to start declining in the coming year, according to the National Hydrocarbons Commission (CNH).

Pemex’s heavy oil farmouts would offer partnership opportunities for the mostly undeveloped Ayatsil and Tekel fields in the Gulf’s shallow waters, the center of Pemex’s drilling activities.

The Mexican government has in its portfolio two adjacent areas, Pit and Kayab, which also could be offered in a bidding round, CNH chief Juan Carlos Zepeda told Reuters.

“It’s key that Pemex moves forward to farmout first as they have the largest and only operative field,” Zepeda said.

Pemex’s exploration and production chief, Jose Antonio Escalera, said the auction could choose to have Pemex alone farmout its two oilfields, or offer the cluster of four fields along with the government.

The whole heavy cluster has recoverable reserves of more than 3 billion barrels with nearby infrastructure to transport and export the crude.

WANTED: HEAVY SOURS

“Heavy sour” no longer means cheap, unwanted oil barrels. Heavy versus lighter oil price differentials in the Atlantic basin have narrowed in recent months due to falling exports by traditional suppliers Mexico, Ecuador and especially Venezuela, whose output fell in 2017 to its lowest in almost three decades.

The only Latin American country consistently supplying the Atlantic with incremental volumes of crude is Brazil, whose new production coming from its vast deepwater reserves is mostly composed of medium sweet grades, not exactly what U.S. Gulf refiners need the most.

“We cannot leave our market to the Canadians,” Zepeda said.

Canada’s heavy oil exports have partially compensated for the lack of supply from Latin America, but transportation constraints often make it difficult for some Canadian producers to offer barrels to U.S. Gulf refiners at attractive prices.

The CNH estimates that Ayatsil, Tekel, Pit and Kayab could start producing about two to three years after awarding the areas.

Reporting by Marianna Parraga; Editing by Paul Simao and Lisa Shumaker