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Editor's column This month, Mexico will begin opening data rooms as it prepares for its first upstream bidding round involving foreign participation. Enthusiasm for the Round One auction—which includes onshore, deepwater, and unconventional acreage in a series of rounds over the next several months—has been dampened by the fall in oil prices, but interest and enthusiasm nevertheless remain high. Packaged with this issue of JPT is a special supplement examining the bidding rounds and its particulars as well as the historic changes taking place in Mexico’s oil and gas sector. The attention is warranted. The country has been closed to most foreign participation in upstream oil and gas for more than 7 decades, after the industry was nationalized in the 1930s. Despite tremendous potential resources, total ownership of hydrocarbons became a strategy that no longer worked. Production at Mexico’s most prolific field, Cantarell, has declined from more than 2 million B/D to less than 400,000 B/D during the past decade. National oil company Pemex has been straddled with debt as it has tried to make up for falling production while funding a third of government spending. But everything is changing under the energy reforms initially approved by the Mexican government in December 2013. It has spent the past year filling in the details: awarding Pemex acreage that it could keep for upstream development, deciding which areas to auction off, and finalizing contract details. It all happened more quickly than expected. Last month, Mexican government officials unveiled the first oil and gas blocks that will be open to foreign bidding: 14 exploratory fields in the Gulf of Mexico. The 14 contracts cover 4,222 sq km in water depths of between 131 ft and 262 ft. Access to data rooms containing seismic and other geological data will be open from 15 January through mid-July. The areas are near two huge oil complexes, Cantarell and Ku-Maloob-Zaap, and have excellent possibilities of containing commercial quantities of oil and gas, particularly light crude, according to the government. The shallow-water round is the first in a series of rounds that will last until the end of the year. Soon, the government will unveil the basic contract terms for mature fields, unconventional resources, and Gulf of Mexico deep water, which is considered the most valuable play. The government had planned to auction 169 blocks in total between July and September but that schedule may be revised. Untapped resources in the country would appear to be plentiful. Investment opportunities range from exploration plays in deep water and shale to enhanced oil recovery in mature fields. The auctions will include more than 100 exploration blocks and more than 60 fields either currently producing or with certified reserves. Finding and lifting costs for most plays are estimated to be around USD 22/bbl, while Pemex puts break-even costs for deep water at about USD 50/bbl. The drop in oil prices could even benefit Mexico if companies begin shying away from areas with higher development costs to what looks like a better bet. JPT
- Government > Regional Government > North America Government > Mexico Government (1.00)
- Energy > Oil & Gas > Upstream (1.00)
Editor's column SPE’s mission to collect, disseminate, and exchange upstream technical information valuable to the industry and the public is served by its many conferences, workshops, training programs, its website, and its publications. Technical papers delivered at SPE conferences have attained a special place in meeting that goal. Conference technical papers explain state-of-the-art technologies and their application to upstream developments, share best practices, and present detailed case studies and solutions to problems. When JPT was first published in 1949, it contained long, full-length technical papers. The creation of SPE Journal, SPE’s first publication dedicated to peer-reviewed technical papers, took some of the publishing burden off of JPT, as did the technical journals that followed that covered disciplines such as drilling, reservoir analysis, and production. Eventually, the increasing depth and breadth of industry technical topics, and the number of papers that were being presented at SPE events, exceeded the ability to publish enough of these great papers. Now, SPE conference papers, as well as papers from other associations, are housed in the OnePetro website at www.onepetro.org, and JPT some years back moved to a format of publishing summaries of the best of these technical papers. As with many of the most important functions of SPE, selecting the best technical papers for publication in JPT would not be possible without the hard work of dedicated volunteers. The JPT Editorial Committee is made up of 47 petroleum professionals— working for service companies, international oil companies, national oil companies, independents, consultancies, and academia—who are specialists in a given area of upstream technology. The committee is currently chaired by Syed Ali, a technical advisor with Schlumberger. The members of the committee are listed in each issue of JPT and can also be found on the SPE website at www.spe.org/jpt/documents/JPT_ Editorial_Committee.pdf. Members of the committee collectively review every paper prepared for presentation at an SPE conference, the four Offshore Technology Conferences, and the International Petroleum Technology Conference and select the best papers in each of 47 separate technical categories. Those categories cover the wide span of upstream E&P and include topics such as deepwater production, drilling technology, formation evaluation, and subsea operations, among others. Each reviewer selects papers for summarizing in an issue of JPT and also picks additional papers for a recommended reading list. The reviewer also prepares a short article on the state of the technology in that particular discipline. Each issue of JPT includes papers from four of these 47 topics. This year, the committee reviewed 4,199 papers for possible publication, compared with 3,893 in 2013. Once the papers are selected, JPT staff summarize the fulllength technical paper into 2 to 3 pages in JPT. The full-length paper is available online free to members for 2 months. This benefit is offered to satisfy members who want to read the full-length paper and those who want to see a wide range of technology covered in each issue. Reader surveys show high approval from members of this summary approach, and the technical paper synopses remain one of the most popular features of JPT. JPT
Editor's column For US operators, new regulations from the federal government regarding hydraulic fracturing practices could not have come at a worse time. Already battling the economic fallout from sharply lower oil prices, the rules seem especially ill-timed for smaller operators that fear the requirements could have a long-lasting impact on how they do business. The new regulations proposed by the US Department of the Interior are designed especially to address public concerns about the safety of drinking water. The rules Require companies to disclose the chemicals they use in hydraulic fracturing operations. The chemical additives are to be listed on the FracFocus website, which many states already use for disclosure requirements. Set standards for the integrity of oil and gas wells, including using strong cement barriers between the wellbore and water zones. Elsewhere in this issue, hydraulic fracturing expert George King of Apache discusses well construction in a Beyond the Headlines column. Force companies that are operating on federal lands to store waste water in surface tanks instead of lined pits. Require pre- and post-drilling inspections and additional reporting requirements. The Interior Department estimates that the regulations will add approximately USD 45 million annually to operations costs on federal lands. But for oil and gas companies, the big concern is the precedent it could set for operations outside of federal lands, opening the door to additional regulation. The Independent Petroleum Association of America (IPAA) and the Western Energy Alliance, both trade associations representing oil and gas producers, have sued the federal government over the rules, claiming that they interfere with individual state’s rights to govern their land. Some states have also responded negatively, including Wyoming and North Dakota, indicating they may join the lawsuit. The interior secretary has said she hopes the rules will serve as guidelines for states desiring to regulate oil and gas activity. The lawsuit states the federal government standards were “a reaction to unsubstantiated concerns” and claims that “there is no factual, scientific, or engineering evidence necessary to sustain” the rules. “At a time when the oil and natural gas industry faces incredible cost uncertainties, these so-called baseline standards will threaten America’s economic upturn while further deterring energy development on federal lands,” said IPAA President and Chief Executive Officer Barry Russell. To the trade associations, the regulations represent a more aggressive stance on hydraulic fracturing from the federal government, which up to now has largely left that oversight to the states. Some local governments have banned outright or put limits on hydraulic fracturing. The Interior Department maintains that it tried to strike a balance among the concerns of the industry, those of environmentalists, many of whom would like to see further restrictions or an outright ban on fracturing, and the public. The new standards can be found on the Interior Department’s website at www.doi.gov. JPT
- North America > United States > Wyoming (0.25)
- North America > United States > North Dakota (0.25)
- Government > Regional Government > North America Government > United States Government (1.00)
- Energy > Oil & Gas > Upstream (1.00)
Editor's column After months of speculation, development of one of the world’s most promising shale plays, Argentina’s Vaca Muerta field, is entering a new phase and attracting strong interest from supermajors. The Vaca Muerta formation in the Neuquén basin is a world-class source rock. The basin is located in west-central Argentina and is the leading producer of hydrocarbons in Argentina covering 137,000 km2. The recent compensation deal between Repsol and the Argentine government over the government’s 2012 expropriation of oil producer YPF eliminated a huge roadblock to international investment in the country’s most potentially prolific shale play. The compensation agreement offered USD 5 billion worth of government bonds in exchange for the Spanish company agreeing to drop its lawsuits against Argentina and YPF for the expropriation. Repsol had threatened to sue companies that struck shale deals with YPF. The investment uncertainty and threat of litigation kept most operators out of Argentina, despite the country’s promising shale prospects. The US Energy Information Administration lists Argentina as the fourth-largest holder of technically recoverable shale oil resources at 27 billion bbl. With this hurdle lifted, Argentina hopes that operators now will flock to the country, leading to a shale boom like the one that has occurred in North America. Last year, Chevron braved the waters, agreeing to invest USD 1.24 billion in a Vaca Muerta joint venture. In September, Dow Chemical signed a deal to invest up to USD 120 million to 16 shale gas wells with YPF. Last month, there were reports that Malaysian state oil company Petronas had signed a memorandum of understanding with YPF for a joint venture in the shale play, and there were further reports that ExxonMobil and Wintershall had expressed interest. Shell entered the Vaca Muerta play in 2011 and has been cautious about investment, but now says it will triple upstream spending to USD 500 million this year, compared with USD 170 million in 2013, given the changes taking place. Also attracting investors are Argentina’s attempts to liberalize oil and gas prices closer to international levels and expectations that the country might modify its existing hydrocarbons law. The existing law governed a local petroleum industry that was self-sufficient and a regional exporter, but the country now faces rising import costs and occasional shortages. The government has promised companies that invest more than USD 1 billion over 5 years that they will be exempt from some foreign-exchange rules and will be allowed to sell 20% of their production outside the country at international prices. YPF controls about one third of Vaca Muerta’s acreage and wants to drill hundreds of wells to produce at least 100,000 BOPD by the end of the decade. As with other countries outside North America, development of shale is anything but certain. In addition to the need to attract operator investment, the country lacks drilling equipment and technical labor and does not have a robust service sector. But outside North America, Argentina appears to be the most interesting global shale play this year and one that Argentina desperately needs to help turn around its energy sector. JPT
- Geology > Rock Type > Sedimentary Rock > Clastic Rock > Mudrock > Shale (1.00)
- Geology > Petroleum Play Type > Unconventional Play > Shale Play (1.00)
- Energy > Oil & Gas > Upstream (1.00)
- Government > Regional Government > North America Government > United States Government (0.56)
- South America > Argentina > Patagonia > Neuquén > Neuquen Basin > Vaca Muerta Shale Formation (0.99)
- South America > Argentina > Patagonia > Neuquén > Neuquen Basin > Vaca Muerta Field > Vaca Muerta Shale Formation (0.98)
Editor's column The opening of Mexico’s energy sector to private foreign investment continues to move forward, with more details of the landmark legislation expected soon. The potential impact this will have on Mexico, its state oil company, and the upstream industry in general is hard to overestimate. Mexico, with all its hydrocarbon riches, has essentially been closed to outsiders since 1938, when the country declared that all mineral and oil reserves in Mexico belong only to the nation. Mexico has watched its neighbor to the north, the United States, reap the benefits of shale development and ultradeepwater production in the Gulf of Mexico with oil prices hovering around USD 100/bbl. The country now would be reversing decades of resource nationalism, allowing foreign oil firms access to potentially world-class fields. In March, national oil company Pemex submitted to the government its list of fields and acreage that it would like to keep under the new energy reform regime. Fields not on the list are expected to be offered in auctions, with Pemex allowed to bid on those as well. The first licensing round is not expected to be held until 2015 with production-sharing and profit-sharing contracts both under discussion. Acreage would likely include conventional resources, unconventional, and deep water. Pemex may also seek partnerships with foreign firms for acreage under deals that could be signed as soon as this year. Published reports say that Pemex requested acreage containing 83% of Mexico’s proved and probable hydrocarbons reserves and 31% of its prospective resources. The acreage includes conventional onshore and shallow water fields, in addition to deepwater fields already under development as well as deepwater areas where discoveries have unveiled attractive prospects, such as in the Gulf of Mexico Perdido Fold Belt. Mexico’s energy ministry has a September deadline to decide what acreage Pemex can keep and what will be available for bidding. International oil companies may be particularly interested in prospective unconventional acreage, such as in the northern part of the country near south Texas, and the unexplored deep water. The state oil company is thought to have neither the finances nor the technology to develop those areas on its own. Pemex is trying to shore up its declining oil production. Current crude output is averaging slightly more than 2.5 million BOPD this year, the same level of production since 2012, and down significantly from a peak of almost 3.4 million BOPD in 2004. Enhanced oil recovery methods at mature fields and plateauing production at the main offshore Cantarell complex are helping keep output from falling further. Crude oil exports average approximately 1.27 million BOPD. Mexico’s once-prolific Cantarell field is producing about 355,000 BOPD, down from 2 million BOPD a decade ago, and the offshore Ku-Maloob-Zaap complex is expected to start declining soon from its current 860,000 BOPD output. JPT
- North America > United States > Texas (0.71)
- North America > Mexico > Gulf of Mexico > Bay of Campeche (0.55)
- Government > Regional Government > North America Government > Mexico Government (1.00)
- Energy > Oil & Gas > Upstream (1.00)
- North America > Mexico > Gulf of Mexico > Bay of Campeche > Sureste Basin > Campeche Basin > Northeast Marine Region > Cantarell Field (0.99)
- North America > United States > Texas > East Texas Salt Basin > Shell Field (0.98)
- North America > Mexico > Gulf of Mexico > Bay of Campeche > Sureste Basin > Campeche Basin > Ku-Maloob-Zaap Field (0.98)