The following is the seventh in a series of summaries of each presentation and panel that took place during the Mexico Oil and Gas Summit last Tuesday, July 1st in the Sheraton María Isabel in Mexico City. To download the speaker’s presentations which have been approved for public distribution so far, click here.
Bud McGuire, Principal and Co-founder of Alpha Petroleum Services, moderated the panel entitled ‘Blueprint for Mexico’s Deepwater Future.’ He pointed out that the challenge to deepwater development is not technology, but licensing terms that are competitive with other investment opportunities in other parts of the world. “A contract is not good unless it is good for both parties. This approach will attract the technology that Mexico needs,” McGuire said and insisted that capital follows projects that yield good returns. He stressed that deepwater developments require a tremendous amount of capital. “These are mega projects of US$1 billion or more. Projects require capital and very long planning, as mistakes are really expensive.” McGuire also mentioned qualified personnel as a crucial element for deepwater that Mexico does not have. Because foreign companies will bring their talent, McGuire suggests native companies such as PEMEX should recruit from the global market.
Commenting on how Mexico can push its deepwater segment, Juan Trebino, Vice President and Partner at Strategy&, said Mexico is competing not only with international players, but also with different types of hydrocarbons that the market wants to develop. In this sense and before technological discussions, Trebino says Mexico has to ensure an environment without legal or environmental restrictions so that national champions and international participants can compete and attract capital. “Deepwater developments are enormous projects with very long life cycles that force us to create contractual frameworks. It is important for parties asking for loans to be able to use the oil molecule as hedging.”
As for technology, Trebino expressed the importance of creating technology centers in Mexico. “There are four deepwater technology poles in the world: the Gulf of Mexico, Brazil, Singapore, and the North Sea. Mexico should join these poles through its Gulf of Mexico operations. This is not about simply creating specific capacities, but to develop the entire deepwater value chain, from subsea well completions to transportation tankers.”
Panelist Ernesto Iniesta, FMC Technologies’ Commercial Director of the Subsea Division Latin America, said drilling in deepwater is mostly intended to explore and estimate reserves. When a reserve is found, he tells, an exploratory well is drilled. But in deepwater, three or more exploratory wells have to be drilled. “Mexico has been exploring deepwater reserves for 14 years. The country began with 400m and now it almost has 3,000m in Perdido.” For him, the challenge is to bring the fluids up to the surface. “Chevron managed to drill to depths of 2,400-2,900m. It took nine years to develop the technology to bring oil to the surface in Perdido. We need to improve efficiency in this area. Given the deepwater conditions in the Gulf of Mexico, there is not a system that can meet Mexico’s deepwater production targets,” Iniesta said. He added that the country will face companies that have a 30 year technological advantage over PEMEX. Therefore Mexico has to develop the technological and human resources to reach the heights of other international players. “The northern area of Perdido is very complex and production will require at least six players.”