Mexico’s state oil company this week migrated the first of its pre-reform oilfield services (OFS) contracts to a new model.
Petroleos Mexicanos (Pemex) on Monday signed a production-sharing agreement (PSA) with London-based OFS company Petrofac for two mature onshore fields in southern Mexico -- Santuario and El Golpe.
The contractual area is located in Tabasco state and covers an area of some 153,000 square kilometers. It contains 135.5 million boe in proved, probable and possible (3P) reserves and currently produces 6,000 b/d, according to Pemex.
“The migration entails investments of up to $1.59 billion,” the state company said. “This will allow production to reach a peak of some 31,000 boe/d by 2027.”
The new PSA contract has a 25-year term, with two optional five-year extensions. Petrofac operates the block with a 36% interest, while Pemex holds the remaining 64%.
The PSA replaces a services contract that Pemex signed with Petrofac in 2011 during a series of tenders for mature fields in northeast and southern Mexico.
Before the 2013-2014 reforms, the services contracts were one of the few openings available for private and foreign oil companies looking to participate in Mexico’s upstream sector.
However, the Mexican constitution at that time forbade private ownership of the country’s hydrocarbons, which prevented companies from booking reserves in Mexico. Instead, they receive a fixed fee per barrel -- $5.01 in the case of Petrofac’s contract for Santuario-El Golpe -- plus partial cost recovery.
The reforms eliminated that restriction and granted Pemex and its contractors the option to migrate to a PSA model, in which the private companies would directly own a share of the production.
Pemex has an additional 21 services contracts waiting in the wings, mostly for onshore areas in northeast and southeast Mexico. Including Santuario-El Golpe, the blocks hold combined 2P reserves of around 2.3 billion boe, according to the company.
Earlier this year, Pemex migrated the offshore Ek-Balam block, in which it is the sole operator, to a PSA contract as well.
The company is also carrying out an aggressive farmout program to secure partners to help develop the blocks it was assigned after the reform. So far, Pemex has farmed out the Trion deepwater project in the Gulf of Mexico (GOM) at the end of 2016 and two mature onshore fields in October this year.
Pemex cancelled a tender to secure a partner for the Nobilis-Maximino GOM deepwater project earlier this month due to a lack of interest, but another round of farmouts is expected in 2018.
Mexican regulators recently approved Pemex’s request to migrate seven areas to a new contract model, an initial step in the preparations for new farmouts. All of the blocks are onshore in the Sureste basin in Veracruz and Tabasco states. Combined, 3P reserves are estimated at 392 million boe of mostly light and medium oil, according to a December investor presentation.
Pemex is also planning to relaunch the Ayin-Batsil shallow water farmout, which failed to draw any bids during the October auction.
*Correction: In the original article the headline indicated that Pemex had signed two PSA. In fact, there is a single PSA that covers two mature onshore fields in southern Mexico. NGI regrets the error.