This week’s Interview of the Week is with Donato Santomauro, Bonatti’s Mexico Country Manager. Bonatti is an international general contractor known for successfully executing challenging projects in remote locations by employing advanced methods and technologies.
Q: What are the advantages of being the first independent oil and gas company in Mexico to have such a large presence in the upstream sector?
A: The main advantage of being a first mover is clear cut: a first mover literally has time to organize itself first in terms of people, data, regulatory understanding and presence. A company can start experimenting and interpreting the information that is available. It can also form part of the first group of companies and organizations that are helping the process advance and progress. And hopefully, first mover advantage, if it is combined with the right execution, leads to positive results. In the Gulf of Mexico, Sierra has focused on the core of the Sureste basin, while several other companies that have started late have had to work with scattered assets or form a strategy based on whatever they can acquire. We have been able to execute around a specific, technically-backed, geoscience-based strategy in the lowest cost part of the basin. Also, our consortia drilled the first exploration well after the Energy Reform and have accumulated a great deal of strategic information and logistics experience that only we have. Other companies are drilling development wells, which is good, but exploration wells are always special.
Q: What is behind the strategy that Sierra is forming with its partners?
A: We want to work with the shrewdest, the most interested and the most technically capable partners that are available for any given round. We are looking for complements and seek to play a strong if not equal role in the pre-bid technical aspects of the projects in which we choose to participate. We look to partners that have a particular expertise relevant to the project or that have experience in deepwater and shallow-water exploration and production, as well as having the right scale of processes and reputation. We like diversification but we also like to repeatedly work with those partners that make sense. Sierra owns, on average, a 38 percent working interest across 10,000km2 in six offshore blocks.
Because we had first mover advantage and due to the quality of our staff, we bring a lot of experience to the table: proprietary studies, analyses and, of course, the first and most important exploration well drilled in the southeast basin so far. All our partners recognize that. Our strategy is to diversify as much as possible, work with the best, those who contribute the most and to contribute ourselves.
Q: Why is Sierra Oil & Gas forming a cluster in the southeast basin?
A: The Sureste basin is a super basin with a large acreage and very few wells drilled, especially in the tertiary formations. The tertiary is a younger geological era that has not been exploited to its full potential. We like the structures, we like the water depth, we like the geology and we are looking for those features that provide a low to medium-risk opportunity. In shallow waters the basin is a continuation of the southeast continental shelf. We are chasing the same trends. We cannot participate in ultra-deepwater exploration areas because we think it just does not make sense given how much is potentially at shallower water, and for a company of our size and scale at this moment.
Q: How great do you believe the reserves might be in the Sureste basin?
A: Before positing a hard number in this industry, a company has to evaluate, drill and take risks. Taking all that into consideration and throwing it together we think the Sureste basin offshore has over 20 billion boe of yet-to-be-discovered potential. Sierra is sitting on 25 percent of that or more. Our intention is to test that with both committed and noncommitted wells in the future. This is an extrapolation of what we believe the reserves potential should be. It will take years to develop but it is important to have the acreage and start now. There is only one Park Lane. Companies need to obtain, work and investigate the prime acreage to find the prize.
Q: What is your commitment to the Mexican oil and gas industry in general and particularly to the companies that want to follow in Sierra’s footsteps?
A: There are more than 30 local companies that have started operations in Mexico as a result of the reform. Four or five are of larger scale than the others but everybody is taking a risk, everybody is trying to participate and everybody is trying to organize themselves. Some companies are involved in marginal activities, while others are involved in onshore, shallow water or deepwater.
I personally believe that for the reform to be successful many things need to happen, not just the development of a good regulatory environment, good regulators and good contracts. We need to have competition. We need to have a strong PEMEX and, in the case of the Mexican players, we need a very strong ecosystem of local companies. Up to Round 2.4 more than 60 percent of the contracts were signed by newly-formed Mexican players. Companies such as Sierra Oil & Gas, Citla Energy, Jaguar and PetroBAL that have ventured into large projects and higher risk areas employ many people here and our activities are essential to the local development. We are committed to the country for the long term. We have capital and staff that comes from Mexico. We try to connect companies with capital providers when we see opportunities. There are many things of that nature that we do and I personally consider that role one of my duties.
Q: What would Sierra Oil & Gas include on its wish list for the next administration?
A: The first is clearly regulatory continuity in the implementation of the reform. Also, if the industry is to grow further and develop to the level required to meet the needs of Mexican society, the next administration needs to keep the pace of the licensing rounds up and maintain a fair risk-reward balance for investors. We also need regulations to continue to work and even to speed up in terms of approvals and permits.
This is an excerpt from the 2018 edition of Mexico Oil and Gas Review. If you want to get all the information, plus other relevant insights regarding this industry, pre-order your copy Mexico Oil and Gas Review or access our digital copy.
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