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Last weekend, President Calderón used the occasion of the inauguration of the Bicentenario rig to make the announcement that Pemex had achieved its goal of bringing 1P reserve replacement above 100%, to 101.1% for 2011, saying at the time:

“We have achieved our aim proposed many years ago. This means Pemex’s production is now guaranteed to be permanently viable, so we can guarantee the future for all Mexicans.”

This might be somewhat overstating the case. Whilst Pemex achieved its target in 2011, maintaining 100%+ reserve replacement for the years to come will still be a significant challenge for Pemex; on January 1st 2012, the counter reset, and while production continues to rattle along at 2.55 million bbl/day, Pemex starts its hunt for new reserves from scratch. However, Pemex’s joy at its achievement is understandable; it was only in 2004 that Pemex’s 1P reserve replacement ratio stood at 22.7%. Results have improved dramatically since then, with the 2010 figure standing at 85.8%, but it was only in 2011 that the company managed to completely replace its production with proven reserves.

In an interview with New Energy Connections earlier this week, Carlos Morales Gil, director of Pemex Exploration and Production, detailed the company’s efforts in reaching its 100% reserve replacement target.

“Only 20% of our 2011 reserve replacement performance is supported by new discoveries; the other 80% comes from development and reservoir management. By addressing declining trends and increasing recovery factors at existing fields, we can boost our reserve levels. Although this activity started several years ago, the restructuring of Pemex E&P gave us a big boost because it meant we had several regional production offices dedicated to reservoir management practices. Of course, exploration has its role, but this is more related to the 3P reserve rate than to the 1P reserves.”

New Energy Connections also had the pleasure this week to interview Dr Rogelio Gasca Neri, one of Pemex’s four professional board members that were introduced following the 2008 energy reform. He had some interesting comments to make about the Pemex E&P restructuring:

“The restructuring of PEP was an administrative move, and the board is fully behind any changes that can help to make the organization more effective. The most positive outcome of the restructuring was that more importance has now been placed on exploration, which was a necessary and appropriate move. The next step I would like to see PEP take is to separate the administration of different production regions in order to minimize competition for attention and resources. This would also have an impact on realistic production forecasts. We need to decouple the reserves of one field from the production of the rest, which does not happen often enough at the moment. We cannot continue to say that the reserves at Cantarell will impact the production levels in other places.”

Gasca Neri makes an interesting point – whilst Pemex might have large reserves left in some mature regions such as Cantarell, production rate here is so low that it will only be a minor contributor to Pemex’s annual production in the years to come. In order to achieve their stated target of 3.3 million bbl/day by 2026, the company will have to invest significantly both production and exploration. As the Pemex board member puts it:

“If Pemex wants to keep up production, then it needs to find the oil to replace what is being extracted every year. This does not just mean new discoveries, but also turning prospective resources into proven reserves. Pemex currently has 54.7 billion boe of prospective resources, and 26.5 billion of these are located in deepwater areas. This is where we will have to go in order to reach the production levels we need in the long-term: if it was just a matter of adding 2 billion barrels to Pemex’s proven resources, it would be simple to go and prove the prospective resources in shallow waters. However, even if we find all the oil there is to be found in shallow waters, it will still not be enough to satisfy long-term demand.”


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