By Jude Webber in Mexico City Fuente Financial Times 22.01.15
The collapse in oil prices will force Mexico to dump some shale fields from its historic private oil tenders this year, but interest in the first areas to be auctioned — shallow-water fields where production costs are less than $20 per barrel — remains firm.
The government, its credibility fragile after an outcry over police involvement in the disappearance of 43 students last September and a string of conflict of interest scandals, badly needs a successful start to a process that many Mexicans still see as the sale to greedy foreign companies of the country’s crown jewels.
As such, the more than halving of oil prices since June could hardly have come at a worse time: Mexico had ambitious plans to tender 169 blocks across the country, ranging from shallow and deepwater fields in the Gulf of Mexico to onshore and shale prospects, and haul in $12bn this year.
Nonetheless, around 30 companies, including ExxonMobil, Chevron, BG, Shell and BHP Billiton, have lined up to pay more than $340,000 each for access to the seismic and geological data that has been the exclusive preserve of state oil company Pemex for nearly eight decades.
Alma América Porres, a commissioner at the National Hydrocarbons Commission (CNH) which is running the bids, says prospects in shallow waters are “virtually assured” — hence the robust interest. Although Pemex, the state-owned oil company, has long expertise in such fields, like other companies it can bid on no more than five of the 14 areas on offer in the first tender.
Elsewhere, though, Juan Carlos Zepeda, head of the CNH, acknowledged that low oil prices meant the authorities were “redefining what can be offered,” adding that they should have a clearer picture by April. Any fields not tendered now could return later.
Mexico has vast shale prospects that are the geological continuation of formations like the Eagle Ford which have transformed US energy fortunes, but relatively swift production times, plus technical challenges including lack of infrastructure and water, mean Mexico’s shale is likely to be put on the back burner for now.
Despite the price gloom, which has prompted oil companies to drop billions of dollars of projects including a $6.5bn petrochemicals plant in Qatar that Shell has put on ice, and exploration permits in Greenland that Norway’s Statoil has handed back, Mr Zepeda says the first deepwater prospects in the Gulf of Mexico due to be auctioned later this year also remain safe at these prices.
That is because production is at least eight years away, making current prices less relevant to exploration budgets for companies eyeing what are considered some of Mexico’s biggest oil prizes.
Mexico also aims in coming weeks to award permits for companies to conduct seismic studies, including assessment of pre-salt prospects that proved such a game-changer in Brazil, Mr Zepeda told the Financial Times.
“We have just opened a new industry,” he said. Two-dimensional seismic studies cost around $2,475 per km offshore and $13,300 per km onshore, while more sophisticated 3D studies cost between $16,500 and $46,500 per sq km for offshore areas and $185,000 onshore, making the new industry another magnet for investment.
“We are anticipating that this [expected increase in seismic information] will redefine our oil potential,” Mr Zepeda said, noting that Mexico has large salt structures in the Gulf of Mexico but does not know for sure whether it has riches beneath to rival those in Brazil.
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