Earlier this year, Pemex launched the second round of integrated service contracts for four onshore and two offshore blocks in the Tampico basin region. As opposed to the first contracts that were awarded, the bidding event for this second round of contracts, which is scheduled to take place this month, has garnered the attention of leading IOCs such as Chevron, Schlumberger and Halliburton. The NOC also plans to launch a third round of ISCs for this year that will include the Chicontepec basin, where Pemex sees a lot of promise in spite of the disappointing production results and the complicated geology of the field.

The ATG project, also known as Chicontepec, averaged a production rate of 63,000 bbl/day in January 2012 and reached an all-time high of only 65,300 bbl/day in the same month. According to Pemex, the Chicontepec basin holds 40% of Mexico’s 3P reserves, and for that reason the NOC has invested millions of dollars in order to improve production at the project. However, the company’s plans have been postponed for different reasons and the expected date for the launch of the third round of ISCs is still unknown. Citing an election law that bans government entities from promoting achievements during the course of a political campaign, Pemex has held off from making any public announcements, which has only added to the uncertainty of whether a third round of integrated service contracts will take place this year or not.

In addition, the upcoming elections are also a factor that needs to be taken into account. The possible change from the governing PAN could lead to unexpected results for Pemex’s development plans. Although Enrique Peña Nieto, the front-runner for the July 1st election, has been talking about opening up Pemex to private investment in the past few months, he has not made public his plans for Chicontepec. Moreover, a poll by Reforma newspaper published this week showed a sudden collapse in the PRI’s electoral support and leftist candidate Andrés Manuel López Obrador gaining ground among undecided voters. A surprise victory by the left would have a huge impact not only on the NOC’s planned projects, but in the minds and decisions of prospective investors.

Pemex’s strategy to develop Chicontepec has focused on technological innovation, cost reduction initiatives and the implementation of best operational practices. The NOC has set up field labs in different places in order to improve its knowledge of the reservoirs, as well as to increase efficiency in production. As a result, the “Presidente Alemán” sector of the field became one of the most important developments in the history of Chicontepec.

Since Pemex funds a large share of Mexico’s federal budget, the government is looking to underpin oil production. The NOC once considered Chicontepec could replace the ageing oil field Cantarell and help increase the proven reserve estimate, but the field has failed to yield the results Pemex needed. It remains to be seen whether a third round of ISCs including Chicontepec will succeed in gathering attention and attract important investors. Although the disappointing track record of the field and the results of the upcoming elections could have an impact on the bidding process, other factors such as the terms of the contracts as well as the contractor’s granted responsibilities and privileges will also play a very important role.

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