The following is the second part of our translation of Emilio Lozoya Austin’s speech during yesterday’s announcement.
The second pillar in PEMEX’s strategy is the most important in the short term regarding partnerships and associations for the development of the fields assigned to it in Round Zero. We are talking about 10 projects that are considered either to be of significant technical complexity, very capital intensive or to have a strategic importance for PEMEX and its project portfolio when considering the contribution of other companies as a complement to PEMEX’s capital, knowledge, and operational capabilities. Through this, we are seeking to increase value creation and risk reduction for PEMEX. These 10 projects can be conglomerated into four packages.
The first considers mature fields. It includes three onshore fields in which we are very interested in optimizing recovery factors and profitability through the application of state-of-the-art technologies. These have 248 million boe of 2P reserves and require a minimum investment of US$1.7 billion over the next five years. This package also considers three mature fields offshore for a second strategic partnership. We are talking about fields that are currently producing and hold 350 million boe of 2P reserves and which will require an investment of US$6.3 billion over the next six years.
The second package is focused on three extra-heavy crude fields, with density less than or equal to 11° API; Ayatsil, Tekel, and Utsil. The main field in this trio is Ayatsil, which is set to begin production by the end of 2014. These fields have 747 million boe of 2P reserves and expect an investment of more than US$6.2 billion in the next ten years.
The third is associated to the development of two giant gas fields in deepwater that hold 212 million boe of 2P reserves and require an investment of US$6.8 billion over ten years. These fields are located in the Gulf of Mexico’s deepwater gas province where Lakach is found. For this reason, the fields will enjoy the preexisting synergies in terms of infrastructure that PEMEX has already worked on in the area.
The fourth package aims to establish two key partnerships in the development of recently discovered deepwater fields in the Perdido Region, particularly, in Trion and Exploratus. These fields are still being delimited but we estimate that together they concentrate 3P reserves with a potential of 500 million boe. These will require a minimum investment of US$11 billion throughout an eight year period.
In summary, PEMEX has identified 10 strategic partnership opportunities within the fields that it has been assigned. These should be consolidated in the short term, in a lapse of 13 months as of November of 2014.
These first selected projects will allow us to maximize partnerships that involve 1.5 billion barrels of 2P reserves plus the additional resources that result from the delimiting of the Perdido fields.
In total, these 10 projects are farm outs that involve an investment US$32.3 billion in periods that range from five to ten years, depending on the project.
Such investment adds up to the aforementioned ISCs and MSCs, which represent investments of US$44 billion. Added up, farmouts and migrating contracts, will total an investment of nearly US$76 billion. Throughout the first five years the farmouts will represent just over US$4.1 million of net annual investment.
If we consider the current annual investment of PEMEX E&P at US$25 million, or 2% of GDP, the 10 farmouts alone will increase investments in the oil and gas industry by 16%. If we then add the US$44 billion associated to the potential investments in ISCs an MSCs, we are talking about an increase of 25% apart from the current annual investment of US$25 million, thus a net increase in GDP of 0.5%.
Finally, the third pillar of our strategy is focused on defining the partnerships that could strengthen our competitiveness and develop our technical and organizational competencies in order to be ready for the bidding process in Round One and all subsequent bidding rounds organized by the National Hydrocarbons Commission in the coming months.