Much ado has been made over Mexico in the last three years as the country turned a new page and opened its industry to foreign investment.
PECOM 2016 crowd. Images from OE Staff.
Make no mistake, it’s a big deal. And, one with rather unfortunate timing. If not for the downturn, who knows what the outcome of Mexico’s first two rounds in shallow water might have been? But, one bright spot has been that, because of the downturn, serious companies are electing to participate in bid rounds while Mexico’s governmental agencies work out the kinks, improving terms with each round. And, despite the global, and local, industry’s current struggles, the mood of the 22nd Annual Petroleum Exhibition & Conference of Mexico (PECOM) was one of bright optimism.
At PECOM, owned by OE’s publisher AtComedia, representatives of the country’s governing energy agencies (including the Energy Ministry [SENER] and the National Hydrocarbons Commission [CNH]) and state-owned oil company, Pemex, came out to discuss life during the reform process and to reinforce that the country is still learning, but also still striving for transparency and accountability.
“We are seeing the birth of the new way to handle the oil industry in Mexico,” said keynote speaker, former head of state-owned oil company Pemex, Carlos Morales Gil, now head of Petrobal, a new, privately-owned Mexican oil company.
Morales Gil discussed the need for not just technology, but people to create and deliver technology. “Technology is not a shapeless entity that creates itself,” he told the standing room-only crowd.
Technology is a huge reason for the long-awaited opening of Mexico’s energy sector. The other huge reason being financial, as Pemex is unable to afford drilling in shale and deepwater areas.
Late March, it was announced that Mexico would opt to have a low local content requirement specific to deepwater. Georgina Trujillo Zentella, president of Mexico’s Energy Commission of the LXIII Legislature, said to do otherwise, “would be like a bullet to the brain” for deepwater plays. Mexico’s SENER and Mexico’s Ministry of Economics set deepwater local content at 3% for 2015 and 8% by 2025. For areas other than deepwater (shallow and onshore) local content was 25% in 2015 and is due to be 35% by 2025.
On the geological front, Oscar Roldan Flores, head of the National Data Repository for Mexico’s CNH, noted that Mexico is investing heavily in seismic data acquisition, with awards going to companies such as TGS, ION Geophysical and CGG. Roldan showed a slide stating that 350,140sq km of new 2D seismic had been acquired and 111,805sq km of new 3D seismic had been shot in the Mexican side of the Gulf of Mexico. Some 387,407sq km of seismic data has also been reprocessed.
Trujillo also said that one big advantage of the energy reform is that Pemex is now able to have joint venture partners for its fields. “If Pemex didn’t have the option for partners, the projects would go away and the economy would get worse,” she said.
Lourdes Melgar, deputy secretary of Energy for Hydrocarbons, (SENER), said of Pemex’s mandate, through the energy reform: “Pemex has the tools to take advantage and improve its financial situation, [implement] new business models and tools.” What does that mean? Melgar said that Pemex must choose projects where they will be profitable.
José Antonio Escalera Alcocer, exploration director, Pemex E&P, acknowledged as much in his presentation, stating that Pemex has three areas for improvement, including operational efficiency and portfolio optimization.
At PECOM 2016, Mexico’s government showed that it has identified key areas on which to work, through the rest of the year and beyond. Mexico’s energy future is just on the horizon. Indeed, Melgar noted that the new deepwater round is set for 5 December.