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Mexico’s deepwater drive

09th January 2013

Mexico is moving into deeper waters to boost its oil production, and is turning to the west for appropriate technologies and expertise. Oil and Gas Technology reports exclusively from Offshore Energy 2012, held in Amsterdam

Mexico’s deepwater drive
Mexico plans to invest USD 5bn from 2012 to 2016 on deepwater plans

While it remains one of the US’ major sources of oil imports, Mexico’s oil production has been declining ever since its 3.4 million barrels per day peak in 2004 – which made it the world’s 5th top oil producer at the time – to just over 2.6 mmbpd in 2009. In 2011, production levels dropped to their 1990 levels. Today it is the world’s 8th largest oil producer, at 2.59 mmbpd, just ahead of Brazil, according to 2011 data from the US Energy Information Administration (EIA).

This is not only due to a sharp output decline in the company’s most productive oil field offshore Cantarell, but also because the Mexican government has relied on Pemex to pay for a large share of its expenditures, particularly in security and education, which leaves less cash for the company to invest in exploration. The cash cow of successive Mexican administrations, Pemex accounts for some 40 per cent of Mexico’s gross domestic product (GDP).

“With big offshore discoveries… exploration in the country almost vanished,” Pedro Silva, head of technical resources at Pemex said in a conference on the Mexican petroleum industry at Offshore Energy 2012, in Amsterdam, attended by OGT. “We have such a large reservoir and such a large offshore area that the government didn’t think exploration was important until they realised that the major fields such as Cantarell would eventually decline.” Offshore accounts for 70 per cent of Pemex’s output, according to the company.

The outlook may change since the election of president Enrique Pena Nieto. The new administration in Mexico City plans to pass energy sector legislation early in 2013 that should help boost the country's petroleum production.

Signaling a desire to do just that, Pemex has been mounting efforts to join the deepwater bandwagon. The company in late August 2012 made what current president Felipe Calderon described as the first big discovery in deep waters, 177 km off the coast of Tamaulipas state in northern Mexico.

Estimated to hold proven, probable and possible reserves of 400 million barrels of crude, the new find is the country’s first big push to exploit deepwater deposits. Mexico plans to invest USD 5bn from 2012 to 2016 on deepwater plans. Pemex estimates there are more than 29bn barrels of crude equivalent, or 58 per cent of the country's prospective resources, in the Gulf.

“We are not concentrated on a single spot. We are trying to cover the whole country. Our scientists are working now on 20 projects in total: 7 offshore, 7 in shallow waters and 6 projects in deep waters,” Pemex’s technical resources boss explained. This suggests that Pemex is diversifying its resource hub, so as to protect itself from the significant drop in oil output after 2004.

Silva added: “We are facing some strategic challenges: the number one is increasing the rate at which we are replacing reserves; the second is to increase the rate of exploration; the third is increase the ultimate recovery factor of our discoveries; and, of course, reduce costs… and accelerate the development of new discoveries, of new production.”

Crucial for furthering the Mexican giant’s offshore and deepwater plans is the use of the most advanced technologies which the West can provide, and in effect this was one of the stated purposes of Pemex’s presence in Amsterdam – to be closer to western expertise.

“We have great expectations in terms of exploration. As you can imagine, we require a lot of new technology, a lot of ideas – a lot of people that could eventually help Pemex. We have technology challenges: subsurface imaging is one of them, as we have a lot of resources below the salt; reservoir characterisation is always a challenge with unconventional resources; and the design of production facilities is also very important,” Silva added.

Several oil and gas giants and service firms have answered Mexico’s call for western technology and expertise to help the country unlock new resources. Among these companies are UK major BP and oilfield services company TAM International.

Pemex and BP have signed an agreement for BP to share the technical information it used to build its global deep water emergency well-capping equipment. The move comes hot on the heels of Pemex’s exploration efforts in the deep waters of the Gulf, where it has limited experience, and as such it seeks to draw on the lessons learned by BP in the 2010 Deepwater Horizon spill.

Under the agreement, BP is making technical information available which Pemex subsidiary Pemex E&P will be able to incorporate in the potential building of its own well capping system for use in the Mexican waters of the Gulf of Mexico.

In addition, BP will brief Pemex E&P on the technical and operational aspects of the system, as well as on the key fabricators which BP used to develop its global deep water well cap.

“The agreement marks another step forward in Pemex E&P’s ongoing efforts to help protect the rich Gulf of Mexico environment in which we operate, as well as to apply state-of-the-art technology as we develop Mexico’s deepwater oil and natural gas resources,” said Carlos Morales, president of Pemex E&P.

“We are pleased to provide Pemex E&P with access to our recent technological innovation and information so that operators in both the USA and Mexico areas of the Gulf of Mexico can be equipped to respond to a subsea well control incident in the Gulf of Mexico,” said Richard Morrison, BP’s head of global deepwater response.

BP’s global deepwater well cap is a 100-tonnes stack of valves which can halt the flow of a leaking well. It can operate in 10,000 feet of water and is rated to pressures of 15,000 pounds per square inch (psi).

Independent oilfield services company TAM International has also secured a contract with Pemex worth USD 6.23m to provide inflatable and swellable packers for use in the Poza Rica-Altamira oilfields, bordering the Gulf coast in the eastern part of Mexico. The contract will run through December 2014.
Inflatable packers swell when in contact with hydrocarbon or water-based fluids. They acquire the diameter of the open hole and allow for zonal isolation, thus preventing fluid loss in wells.

The swellable packers are available in either oil-activated, water-activated or a combination compound that swells in both oil and water, according to TAM International. They react to well-bore fluids, drilling mud, or completion fluids and can expand up to three times their run-in volume. Expansion rates and differential pressure ratings are dependent upon temperature, expansion fluid, time, rubber compound, and length of seal, the company claims.

TAM’s casing annulus packers (CAP) are used for zonal isolation of wells of all categories. They are capable of swelling at temperatures of up to 302˚C and withstanding a differential pressure of up to 62 MPa. In addition to zonal isolation, CAPs prevent gas migration and allow two stage cementing.