Abstract

Mexican energy reform has opened an ambitious transformation process, authorizing private investment for exploration and extraction of hydrocarbon under different type of contracts. This transformation has led IOC's, NOC's and newcomers to enter in Mexico in order to achieve best field development plans for production increase in onshore, offshore and unconventional fields.

The objective of this study is to analyze winner's economics expectations for 25 matures fields of Round 1-Tender 3. Within the framework of this tender, winners offered royalty values higher than 60% for 14 fields, from 40% to 60% for 6 fields and lower than 40% in 5 fields, while Mexican government requested minimum royalties from 1% to 10% for all fields. The evaluation took into account the bidding offers (royalties and minimum work plan), economics and technical variables in order to build a 20 years full cycle preliminary economic analysis.

A tailored analysis was done for each field, where production profiles took into account: drilling and workover wells based on minimum work plan and reservoir technical challenges (pressure depletion, geological complexity, fluid type, well productivity and facility capacity), combining with economics variables expected, such as: CAPEX (e.g. wells drilling and workovers costs, facilities revamping, etc.), OPEX (e.g. lifting cost, treatment water/gas, etc.), royalties, oil price for future selling (Mexican basket), in order to generate more suitable development plan according to bidding process.

For each field an operating margin (from 3.4 to 28.3 USD/STB) and development-operational cost (from 10.5 to 82.1 USD/STB) were estimated considering average Mexican basket in 50 USD/STB, for this consideration 15 fields would have the chance to have positive gross income, the remaining 10 fields, does not have any possibility to make any profit.

Although results of this study were not considered for decision making, a visualization of the status of each field is shown, allowing to know the expectations of each winner. 11 fields have high chance to be operated by the first or second winner with investment ranging between USD 5 and 43 million, on the other hand, 14 fields have high potential to be returned immediately or after 2 years evaluation period with potential investment varying from USD 6 to 73 million. These results indicate that in most of the cases royalties offered by bidders exceeded the government expectations, leading a tight scenario beyond economic feasibility of these fields.

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