Photo by Mexico Oil and Gas Review – Arenque area is 5 on the map

Pemex had more than one piece of good news this week. While the second announcement may not have come with a presidential address on live television, in any other week it would have been a significant event worthy of much attention: Pemex awarded its first onshore block to a private operator under the country’s new incentive based contract (ISC) scheme. The winner, as many in the industry may have guessed, was once again Petrofac, now operator at four areas in Mexico, including Arenque.

In order to understand a little more about what led to this award, we have to go back to January of this year, when Pemex announced the tenders for their 2nd round of ISCs. The tenders announced included six different areas in Mexico’s North region: two in Tamaulipas, two in Veracruz, and two offshore. These six fields had already started dropping in production, and Pemex was eager now to let private companies help them with technologies the NOC didn’t have to revert this declining trend and increase production by 90,000 bbl/day.

A few months later, four of these areas were awarded when the tenders closed. Schlumberger and Petrofac, in a joint bid, got their hands on Pánuco, the largest of the available areas; Chieron Holdings was awarded Altamira; and the consortium led by Monclova Pirineos Gas was given the chance to try their technologies in the two smallest areas, Tierra Blanca and San Andrés. However, Atún and Arenque, the two offshore fields in the round, were voided. It turns out that there was little interest in bidding for the areas: just four companies bid for the Arenque area, while nobody even submitted a bid on Atún. Pemex set a ceiling on the maximum fee-per-barrel at US$7.25 per barrel for Arenque, but no companies could find a way to make an offer at this price or under – examples include Dragados bidding US$10.78 per barrel and Burgos Oil Services bidding at an extremely high US$24 per barrel.

The current contracting law for Mexican integrated service contracts means that if a field is not awarded during the bidding process, then Pemex can, at a later date, directly award the contract to one of the original bidders at a fee per barrel agreed upon by both parties. This is what has happened – after talks with all four companies that bid on the field, the field was eventually awarded directly to Petrofac this week, at a price of US$7.90 per barrel.

The most intriguing aspect of this whole series of events is why Pemex chose to put such a low ceiling on Arenque. A recent Reuters article highlighted the fact that this ceiling was 20% lower than the prices set for the onshore blocks awarded in the same round – strange considering that offshore field development is normally much more expensive than onshore. However, the newly agreed price between Petrofac and Pemex should not be viewed as a loss for Petrofac – with the potential to increase production dramatically at the field, they should be able to turn a tidy sum. Currently, the recovery factor at Arenque stands at around 11%, and Pemex estimates that the contract will generate around US$500 million in earnings. There are also the long-term benefits to reputation to be considered. By taking a fourth integrated service contract, Petrofac is establishing itself as the expert on Mexico’s mature and marginal fields.

404

Looking for something?

Use the form below to search the site:


Still not finding what you're looking for? Drop a comment on a post or contact us so we can take care of it!

Visit our friends!

A few highly recommended friends...