Repsol not only acquired this area in the rounds of the past six-year term. The Spanish company, which teamed up with some other oil companies, won six contracts between 2017 and 2018. But from the beginning, area 29, located in Cuencas Salinas, was the one that most attracted the company’s attention. He had enough information about the rest of the blocks to decide to bet on them and begin exploration, but this one, on which he bases his decisions today, interested him above all others.
Limardo says that this block was one of the most competitive of the rounds. The data from the regulator confirms it: five offers were presented, one of them from Pemex. Repsol and its partners – the Malaysian PC Caligari, the Thai PTTE and Sierra Oil and Gas, which was later bought by the German Wintershall Dea – offered the State a tie-breaking bonus of 151 million dollars (mdd) to take over the asset, almost double what the Italian oil company ENI and the companies that accompanied it in consortium, which came in second place in the bid, had put on the table.
The business suspicions –which were based more than luck on lengthy analyzes and geological information– of the Repsol team and its partners were quickly confirmed. In May 2020, the oil companies announced two discoveries in block 29: Polok and Chinwol. They were the first deep sea discoveries resulting from the energy reform exercises. The announcement was made during the first months of the pandemic and two years after the oil companies signed the contract with the Mexican State.
“Everything that we do in the future passes through block 29, it is the basis of growth for Repsol exploration in Mexico”, says Limardo. “Everything that we are going to do in the future, whether because there are rounds or because there are other opportunities or partners, will always be related to this area that we already know.”
Repsol – which remained as the operator of the six blocks – drilled five wells in total, only those two were producers, and obtained geological information from the rest. Since it won the bids, it has invested $700 million in the blocks, around $500 have been just for the area where the two discoveries are. “It is where we have invested the most because it is where we have had results and we see that there is potential to move the project forward.”
Limardo tries to convey that the oil company is not acting hastily, that it is making progress, but that it is barely paving the way. There is still much to explore and plan for, which he will continue to work on hoping to find more oil because the company believes that Polok and Chinwol could only be the first two fields found. Next year, according to plans, it will intensify drilling in the area, searching for more crude. But the guiding goals have already been set and they are ambitious: the company wants to achieve the first oil production from the asset between 2026 and 2027, and for this it will invest around 4,000 million dollars, which will be deployed in the following four years.
When that is complete, eight years will have passed between the time the contract was signed and the first barrels of crude were brought to market. It is said among industry participants that the oil business, and especially the deepwater business, is one of great patience. Limardo nods when asked if he’s okay with it. “Yes, deep water is a business that requires patience and a lot of financial risk, technical risk, and that must be developed with a long-term vision,” he comments in the interview. Repsol knows about that, they already have experience. It has deepwater production in Brazil, Norway, the United Kingdom and the United States. Mexico would join the list in a few years.
The company and its partners will present their development plan to the regulator, where they will commit their specific objectives, until 2024, once the exploration period officially ends.
But a commitment as high as the one that the Spanish oil company has set for the deep-water area requires full attention and prioritization of resources. Repsol knows this and has already made decisions: it submitted to the National Hydrocarbons Commission, the market regulator, a series of requests to return the rest of the areas it won in the rounds. The process concluded last week.
At the beginning of this year, it had already returned 50% of a block in the Burgos Basin. It is not that there is no oil in the other blocks that the Spanish company operates, but that Polok and Chinwol are already two accurate targets with a high production prospect.
Limardo says that it is still too early to give concrete figures, but the company already estimates that it will be able to produce around 50,000 barrels a day in the early stages alone. To give a dimension, it is around half of the oil produced up to now by all the private companies that entered the business with the reform.
a promising field
The contract model that the company has with the Mexican State states that the crude oil obtained may be sold in its entirety by the latter, and that in exchange the government will receive royalties. Thus, Repsol will have complete freedom to market hydrocarbons, either inside or outside the country.
But to reach that commercial phase, Repsol’s biggest challenge is logistics. The company’s bet is in the Sonda de Campeche, an area that for decades has sustained Pemex’s production. Crossing near the southern coast of the country means continually running into oil platforms, hydrocarbon separation batteries and other facilities.
But Polok and Chinwol are very far from the rest of the assets, the two deposits are lost on the horizon: they are around 100 kilometers from the coast and about 600 meters deep. “We are not close to any infrastructure that makes us produce faster,” says Limardo.
Repsol will bring to Mexico, as the commercial phase stage approaches, a floating storage and offloading production vessel (known as FPSO in the industry), to process, store and mobilize the hydrocarbons. The distance of the asset from the coast and the lack of previous infrastructure make this ship the best option to produce within the seabed. Some companies, such as the Italian ENI, have opted for this option for their production.
The Repsol manager does not want to mention goals that they may not be able to fully meet at one point, but he knows that, if Pollock and Chinwol were to achieve production, the Spanish company would mark a milestone in crude oil production in the country, even if that is missing. more than a couple of years. Pemex has announced upcoming gas production at Lakach, a deepwater field. The most recent date for this is summer 2024. But outside of that, no other company has announced that it will bring any deepwater block to development soon. Repsol could be the first company to obtain oil from one of these fields, which until now in Mexico have only been expectations.