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Building a New RegulatoryFramework for E&P in Mexico
Javier Estrada
1August 2010
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1. The CNH
2. Regulations adopted and next steps
Subjects
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The CNH
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3
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Declining reserves and oil production
The super-giant Cantarell reached its peack production in 2004Risks of holes in the public finances
Years with low investments in exploration translated in low reserves
Mexico has ample petroleum ressources offshore and in land
Pemex needed a profound reorganization:Several simultanous projects upstream and downstream
Consensus about the need to restructure the financial framework
Imperative to expand Pemexs capacity to execute large projects
Governing structure and legal framework adapted to the oil business
National R&D in the petroleum sector were insuficient
Financial needs in univerities and research institutions
Development of companies ofering petroleum services
The E&P sector before the reform
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Energy Reform
To execute Nations rightsrelated to Hydrocarbonstopics.
To define productions platformtrajectory.
Reserves restitution definition.
To authorize exploration andproduction projects
To approve, refuse, modify,
revoke and/or cancelhydrocarbons exploration andexploitation grants.
Technical andregulatory agency inthe hydrocarbonsector -check andbalance systembetween PEMEX and
The Energy Ministry.
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Mexican E&P Outlook
Mature
fields
Hydrocarbons
Policy
Exploration
Highly
technical
fields
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Mature fields
Mexican E&P Outlook
Mxico has 223 oil and associated gas fields with production and reserves, fromwhich 177 are already declining or will be in the next 2 years. From the 46 fields
in development, 29 are Chicontepec fields.
Status of oil and associated gas fields**
*Size: Supergiant original 2P reserves > 5,000 MMBPCE; Giant > 1,500 MMBPCE; Big > 250 MMBPCE;
medium > 80 MMBPCE.** Status: Declining if production is less than 85% of the max; plateau if production reached its peakbut hasnt declined more than 85% of the peak.
Size* Declining Plateau Development Total
Supergiant 1 0 0 1
Giant 5 2 0 7
Big 44 8 3 55
Medium 32 7 7 46
Small 62 16 36 114
Total 144 33 46 223
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Highly technical fields: Chicontepec
Mexican E&P Outlook
Large reservesbut bigtechnicalchallenge
Veracruz
Hidalgo
Puebla
Golfo deMxico
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Exploration
Mexican E&P Outlook
Worlds sedimentary basins with 2,000 exploratory wells in the last 25 years
In the whole country, PEMEX has drilled 1,228 exploratory wells in the last 25 years.
SOURCE: Article by Leonardo Maugeri, Scientific American.
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Exploration
Mexican E&P Outlook
0
20
40
60
80
100
120
140
160
180
193
8
194
0
194
2
194
4
194
6
194
8
195
0
195
2
195
4
195
6
195
8
196
0
196
2
196
4
196
6
196
8
197
0
197
2
197
4
197
6
197
8
198
0
198
2
198
4
198
6
198
8
199
0
199
2
199
4
199
6
199
8
200
0
200
2
200
4
200
6
200
8
Located with no 3Dseismic
Old technology
80%
4,844 Wells
Exploration wells
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Exploration: Prospective Resources (MMMOBE)
Mexican E&P Outlook
Onshore and Offshore shallow waters(< 500 m) resources account for 51% oftotal prospective resources (28.9 MMMBOE).
Offshore43.8
Onshore12.8
56.6
MMMOBE
43.8
MMMOBE
19.7
3.74.3
16.1
> 1,500
< 500
500 1,0001,000 1,500
Depth
(m)
Deep Waters
27.7
MMMBOE
Total Offshore
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Exploration: The Gulf of Mexico
Mexican E&P Outlook
White-1Trident-1
Baha-1Jack-1
Tamha-1
Lalail-1
Noxal-1
Tamil-1
Chuktah-201
Golfo deMxico
Sur
reaPerdido
Lakach-1
Nab-1
Chelem-1
Golfo deMxico B
Simbologa
Extra-heavy oil (
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Exploration: Not explored areas (subsalt province)
Mexican E&P Outlook
0 100 200 300
km
Poza Rica
Veracruz
Reynosa
1
Cd. Carmen
Subsalt
Belt
Salt Gulf Province
Plegado Perdido
Belt
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Increasing production costs
The maturing of our producing fields, together with the incorporation
of new production from highly technical and complex fields, implies anincrease in lifting costs.
Young Mature
1990
Acum. Prod.
Cost/bbl
Maturing of oil fields
2010
C1990
C2010
Incorporation of more complex fields
Cost/bbl
Easyfields
ComplexFields
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Acum. Prod.
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Regulations adopted and next steps
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17,319
14,961
6,667
4,568
Chicontepec Declining In production Without production
Defining the hydrocarbons policy
To identify the opportunity areas for the proper exploitation of our
oil and gas fields: hydrocarbon reserves
74% of our reserves
require secondary
recovery and improved
recovery.
The reserves not beingexploited are spread in
medium size and small
fields
Our reserves are in fields
of smaller size than the
declining fields
Distribution of the oil and gas reserves*
(% - MMBOE)
11%40%
34%15%
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Salina
del Itsmo
Litoral de
Tabasco
Chiapas-
Tabasco-
Comalcalco
Tampico Misantla
Opportunities: 239
MMBOE: 2,435
Sabinas
Opportunities: 92
MMBOE: 438
Veracruz Opportunities:
361 MMBOE: 1,570
Yucatan Shelf
Opportunities: 40
MMBOE: 1,389
Burgos Opportunities:
512 MMBOE: 2,719
Sureste Opportunities:
1,108 MMBOE: 16,703
Gulf of Mexico
Opportunities: 640
MMBOE: 31,485
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Defining the hydrocarbons policy
To identify the opportunity areas for the proper exploitation of our
oil and gas fields: prospective resources
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Salina
del
Itsmo
Litoral de
Tabasco
Chiapas-Tabasco-
Comalcalco
Salina del Itsmo
Opportunities: 321MMBOE: 6,824
Chiapas-Tabasco-Comlacalco
Opportunities: 379
MMBOE: 5,379
Litoral de Tabasco
Opportunities: 190
MMBOE: 3,047Macuspana
Opportunities: 218
MMBOE: 1,453
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Defining the hydrocarbons policy
To identify the opportunity areas for the proper exploitation of our
oil and gas fields: Subsalt potential
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Regulation and supervision
Examples of regulation enacted by the CNH:
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Rules to reduce the flaring and venting
of natural gas
Guidelines to acknowledge the certification
of oil and gas reserves
Technical guidelines for the design of
new projects
December 4, 2009
December 21, 2009
August 4, 2010
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Guidelines for the design of new projects
(FEL methodology)
Design phase
Value
Conceptualization Definition Execution Operation
Time
Value IdentificationIdentificaction of valuables Performing the values
OperationExecution PlanPlan approvalEvaluation of
options
Identification of
opportunities
Poor
Definition (limited scenarios)
GoodDefinition (several scenarios)
Poorexecution
Goodexecution
DD
A
B
C
Visualization
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Oil Production scenario (illustration)
Expected production by type of
resource or reserve
(thousand bbl day)
Associated investments
(million US dollars)
0
5,000
10,000
15,000
20,000
25,000
30,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
ReservaTotal
Recursos
Prospectivos
Observed
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
Probada
Probable
Posible
Recursos
Prospectivos
Observed
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01,000
2,000
3,000
4,000
5,0006,000
7,000
8,000
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Reforma Inercial
Gas production scenario
(illustration)
A stable supply of natural gas is expected in the futureNatural gas production
(million cubic feet per day)
Source: SENER22
F th i l ti d l ti
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Forthcoming regulations and evaluations
from the CNH
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Guidelines for deep water projects (1st package)
Metering
Recovery factors
October, 2010
March, 2011
December 2010
2P and 3P Reserves 2010
Renewal of Pemex E&P assignments (project
evalautions)
September, 2010
September 2011
to July 2013
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CNH Approach
Internal standards of
Pemex
3 Tier Strategy
Design specific regulation
Technical assessment of the
E&P projects
ACTIONS
Assess all the E&P to:
Revise the internal standardsand procedures of Pemex, aswell as the managementsystems to enforce them.
Introduce specific technical
regulation. Provide technical
assessments and follow up.
Regulation hybrid approach towards
Performance Based Case Assessment
1
2
3
Regulation is complemented with supervision, inspections (and drilling permits, when required) 24