Mexico’s President Andrés Manuel López Obrador was cheered in recent days by the news of the Quesqui discovery in his home state of Tabasco, described by state oil company Petróleos Mexicanos (Pemex) as "gigantic" and the company's largest since 1987.

Quesqui could hold more than 500 million boe in 3P reserves, Pemex said in a statement.

Pemex CEO Octavio Romero Oropeza said that the company's current plans are to drill 11 new wells next year to hit 69,000 b/d of crude and approximately 300 MMcf/d of natural gas at the onshore field, with those figures reaching 110,000 b/d and 410 MMcf/d by 2021.

The company will have two years in which to establish the dimensions and importance of Quesqui to the upstream regulator, the Comisión Nacional de Hidrocarburos (CNH), Ramses Pech, the CEO of the Tabasco-based Caraiva consultancy, told NGI’s Mexico GPI.

"The 500 million boe of the initial Pemex announcement on Quesquí will not necessarily be recovered," he added. "The development plan will have to provide that calculation."

Still, López Obrador has not hid his joy over the Quesqui discovery, claiming it as a sign of the success of Pemex’s new upstream strategy. Investment had been concentrated by the energy reform of the previous administration in the north of the country and the deepwater of northern Mexico when "everyone knew that the oil is on land in Tabasco and Chiapas and the shallow coastal waters off Tabasco and Campeche," he said.

But not everyone is convinced.

David Shields, analyst on energy affairs in Mexico, has launched a frontal attack on the "small is beautiful" strategy that aims to reverse a 15-year decline in crude output by Pemex.

In his regular column in the daily Reforma and in conversation with NGI's Mexico GPI, Shields argues that the strategy makes no economic sense for a company already burdened by more than $106 billion in debt.

Even if the strategy were to prove successful in volume terms, Shields says, it would imply a level of productivity and success in exploration efforts that Pemex has never previously achieved.

What is implicit in the plan, he adds, is that some 22 small fields can be discovered and developed within about two years to be replaced with 20 or so more.

"But that's not how things work, and Pemex ought to know that," he wrote in his column. "No matter how tiny the fields might be, each requires a process that includes exploration, development and exploitation until it is abandoned. In all it will be a question of several years.

"Given the constraints that Pemex faces in its budget, there is no way that about 100 small new fields can be activated and put into production over the six years of a Mexican administration, not to mention the historical backlog that already exists."

Shields said that the mini-fields strategy is very similar to the one that Pemex followed, disastrously, in the development of the Chicontepec structure in the Tampico-Misantla basin in the north of the southern Gulf state of Veracruz during the 2006-2012 administration of President Felipe Calderón.

Calderón, like all Mexican presidents since the oil nationalization of 1938, acted in effect as the chairman of Pemex.

Faced by the rapid decline of the Cantarell complex in the Sound of Campeche from its 2.2 million b/d 2004 output, Calderón was wooed by the siren songs of officials who claimed that Chicontepec could replace as much as 1 million b/d of the missing output.

After investment of more than $2 billion, and with output of a mere 60,000 b/d, Pemex finally conceded what was a historic defeat.

"It's important to remember Chicontepec," Shields said. Then as now, the Pemex strategy was based on the development of mini-fields, he added.

The problem is that the relative cost of the development of the mini-fields is complicated in some cases because it involves the reopening of wells from past administrations. Where that happens, the Mexican taxman will demand a large cut because there will be no "new oil" fiscal incentives.

With everything included, the mini-fields strategy could lose money for Pemex on the price of its current export mix of just over $54/bbl, Shields said.

Luis Miguel Labardini, a partner in the Mexico City-based consultancy, Marcos y Asociados, told NGI’s Mexico GPI that regardless of lingering doubts, the discovery is good news.

"We must give Pemex the benefit of the doubt. Pemex is managed by very professional engineers, and they know what they're doing. The bulk of Mexico's production for the present will be from mature fields. It is true that the 22 fields that are being developed right now are encountering some difficulties but Pemex is convinced that productivity and efficiency have to be improved.

“We have to sit and wait over the next year or so before rushing to judgement over Pemex and its upstream strategy."