building a new regulatory framework for e&p in mexico

8/7/2019 Building a New Regulatory Framework for E&P in Mexico

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Building a New RegulatoryFramework for E&P in Mexico

Javier Estrada

1August 2010


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1. The CNH

2. Regulations adopted and next steps

Subjects

2


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The CNH

1

3


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4

Declining reserves and oil production

The super-giant Cantarell reached its peack production in 2004Risks of holes in the public finances

Years with low investments in exploration translated in low reserves

Mexico has ample petroleum ressources offshore and in land

Pemex needed a profound reorganization:Several simultanous projects upstream and downstream

Consensus about the need to restructure the financial framework

Imperative to expand Pemexs capacity to execute large projects

Governing structure and legal framework adapted to the oil business

National R&D in the petroleum sector were insuficient

Financial needs in univerities and research institutions

Development of companies ofering petroleum services

The E&P sector before the reform


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Energy Reform

To execute Nations rightsrelated to Hydrocarbonstopics.

To define productions platformtrajectory.

Reserves restitution definition.

To authorize exploration andproduction projects

To approve, refuse, modify,

revoke and/or cancelhydrocarbons exploration andexploitation grants.

Technical andregulatory agency inthe hydrocarbonsector -check andbalance systembetween PEMEX and

The Energy Ministry.

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Mexican E&P Outlook

Mature

fields

Hydrocarbons

Policy

Exploration

Highly

technical

fields

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Mature fields

Mexican E&P Outlook

Mxico has 223 oil and associated gas fields with production and reserves, fromwhich 177 are already declining or will be in the next 2 years. From the 46 fields

in development, 29 are Chicontepec fields.

Status of oil and associated gas fields**

*Size: Supergiant original 2P reserves > 5,000 MMBPCE; Giant > 1,500 MMBPCE; Big > 250 MMBPCE;

medium > 80 MMBPCE.** Status: Declining if production is less than 85% of the max; plateau if production reached its peakbut hasnt declined more than 85% of the peak.

Size* Declining Plateau Development Total

Supergiant 1 0 0 1

Giant 5 2 0 7

Big 44 8 3 55

Medium 32 7 7 46

Small 62 16 36 114

Total 144 33 46 223

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Highly technical fields: Chicontepec

Mexican E&P Outlook

Large reservesbut bigtechnicalchallenge

Veracruz

Hidalgo

Puebla

Golfo deMxico

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Exploration

Mexican E&P Outlook

Worlds sedimentary basins with 2,000 exploratory wells in the last 25 years

In the whole country, PEMEX has drilled 1,228 exploratory wells in the last 25 years.

SOURCE: Article by Leonardo Maugeri, Scientific American.

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Exploration

Mexican E&P Outlook

0

20

40

60

80

100

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160

180

193

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4

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6

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200

8

Located with no 3Dseismic

Old technology

80%

4,844 Wells

Exploration wells

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Exploration: Prospective Resources (MMMOBE)

Mexican E&P Outlook

Onshore and Offshore shallow waters(< 500 m) resources account for 51% oftotal prospective resources (28.9 MMMBOE).

Offshore43.8

Onshore12.8

56.6

MMMOBE

43.8

MMMOBE

19.7

3.74.3

16.1

> 1,500

< 500

500 1,0001,000 1,500

Depth

(m)

Deep Waters

27.7

MMMBOE

Total Offshore

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Exploration: The Gulf of Mexico

Mexican E&P Outlook

White-1Trident-1

Baha-1Jack-1

Tamha-1

Lalail-1

Noxal-1

Tamil-1

Chuktah-201

Golfo deMxico

Sur

reaPerdido

Lakach-1

Nab-1

Chelem-1

Golfo deMxico B

Simbologa

Extra-heavy oil (


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Exploration: Not explored areas (subsalt province)

Mexican E&P Outlook

0 100 200 300

km

Poza Rica

Veracruz

Reynosa

1

Cd. Carmen

Subsalt

Belt

Salt Gulf Province

Plegado Perdido

Belt

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Increasing production costs

The maturing of our producing fields, together with the incorporation

of new production from highly technical and complex fields, implies anincrease in lifting costs.

Young Mature

1990

Acum. Prod.

Cost/bbl

Maturing of oil fields

2010

C1990

C2010

Incorporation of more complex fields

Cost/bbl

Easyfields

ComplexFields

14

Acum. Prod.


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Regulations adopted and next steps

2

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17,319

14,961

6,667

4,568

Chicontepec Declining In production Without production

Defining the hydrocarbons policy

To identify the opportunity areas for the proper exploitation of our

oil and gas fields: hydrocarbon reserves

74% of our reserves

require secondary

recovery and improved

recovery.

The reserves not beingexploited are spread in

medium size and small

fields

Our reserves are in fields

of smaller size than the

declining fields

Distribution of the oil and gas reserves*

(% - MMBOE)

11%40%

34%15%

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Salina

del Itsmo

Litoral de

Tabasco

Chiapas-

Tabasco-

Comalcalco

Tampico Misantla

Opportunities: 239

MMBOE: 2,435

Sabinas

Opportunities: 92

MMBOE: 438

Veracruz Opportunities:

361 MMBOE: 1,570

Yucatan Shelf

Opportunities: 40

MMBOE: 1,389

Burgos Opportunities:

512 MMBOE: 2,719

Sureste Opportunities:

1,108 MMBOE: 16,703

Gulf of Mexico

Opportunities: 640

MMBOE: 31,485

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oil and gas fields: prospective resources


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Salina

del

Itsmo

Litoral de

Tabasco

Chiapas-Tabasco-

Comalcalco

Salina del Itsmo

Opportunities: 321MMBOE: 6,824

Chiapas-Tabasco-Comlacalco

Opportunities: 379

MMBOE: 5,379

Litoral de Tabasco

Opportunities: 190

MMBOE: 3,047Macuspana

Opportunities: 218

MMBOE: 1,453

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oil and gas fields: Subsalt potential


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Regulation and supervision

Examples of regulation enacted by the CNH:

19

Rules to reduce the flaring and venting

of natural gas

Guidelines to acknowledge the certification

of oil and gas reserves

Technical guidelines for the design of

new projects

December 4, 2009

December 21, 2009

August 4, 2010


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Guidelines for the design of new projects

(FEL methodology)

Design phase

Value

Conceptualization Definition Execution Operation

Time

Value IdentificationIdentificaction of valuables Performing the values

OperationExecution PlanPlan approvalEvaluation of

options

Identification of

opportunities

Poor

Definition (limited scenarios)

GoodDefinition (several scenarios)

Poorexecution

Goodexecution

DD

A

B

C

Visualization

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Oil Production scenario (illustration)

Expected production by type of

resource or reserve

(thousand bbl day)

Associated investments

(million US dollars)

0

5,000

10,000

15,000

20,000

25,000

30,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

ReservaTotal

Recursos

Prospectivos

Observed

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

Probada

Probable

Posible

Recursos

Prospectivos

Observed

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01,000

2,000

3,000

4,000

5,0006,000

7,000

8,000

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Reforma Inercial

Gas production scenario

(illustration)

A stable supply of natural gas is expected in the futureNatural gas production

(million cubic feet per day)

Source: SENER22

F th i l ti d l ti


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Forthcoming regulations and evaluations

from the CNH

23

Guidelines for deep water projects (1st package)

Metering

Recovery factors

October, 2010

March, 2011

December 2010

2P and 3P Reserves 2010

Renewal of Pemex E&P assignments (project

evalautions)

September, 2010

September 2011

to July 2013


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CNH Approach

Internal standards of

Pemex

3 Tier Strategy

Design specific regulation

Technical assessment of the

E&P projects

ACTIONS

Assess all the E&P to:

Revise the internal standardsand procedures of Pemex, aswell as the managementsystems to enforce them.

Introduce specific technical

regulation. Provide technical

assessments and follow up.

Regulation hybrid approach towards

Performance Based Case Assessment

1

2

3

Regulation is complemented with supervision, inspections (and drilling permits, when required) 24

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