LUKOIL’s office in Mexico celebrates its third anniversary this year. Oil Journal explains how LUKOIL is using a new approach to help that country unleash its hydrocarbon potential.
Three years ago, Mexico ended a 75-year state monopoly on oil exploration and production enjoyed by operator PEMEX. LUKOIL became the first foreign company to enter into a partnership with PEMEX and lay the foundations for a future business relationship by sharing its environmental protection knowledge. The agreement was signed by LUKOIL President Vagit Alekperov and Pemex CEO Emilio Lozoya Austin on the sidelines of the World Economic Forum in Davos, Switzerland in January 2014.
In July 2015 LUKOIL signed a service contract to develop the 230 km2 (56,800 acres) Amatitlán block near Poza Rica, Veracruz, Mexico. Production from Chicontepec on the Amatitlán Block peaked in the early 2000s and has been on a decline since.
“At the same time, LUKOIL thinks that the main prize lies slightly deeper – in the Upper Jurassic Pimienta formation – and is aiming to unlock its resources by drilling and testing this hydrocarbon-rich shale,” said Kevin Black, LUKOIL VP and Managing Director of LIUW [see above]. “That’s why Lumex Holding (management company formed by LUKOIL and Marak Capital. – OJ) entered into a definitive agreement with Renaissance Oil Corporation in January 2017 for the joint development of the Amatitlán block.”
The goal of the partnership is to unlock the additional potential of the Tampico Misantla basin in Mexico. Renaissance is aligned with LUKOIL in its intention to apply modern oilfield development technologies in Amatitlán to reestablish production in the underdeveloped Chicontepec formation and to geologically and technologically de-risk and commercialize the Upper Jurassic shale formations.
“The addition of Renaissance to the venture and their shared enthusiasm for the project signifies the high quality and long term value this project brings to LUKOIL’s world-wide portfolio,” said Black. The
Tech Behind the Talk
In early 2016, LUKOIL made a strategic decision to participate in Mexico’s deepwater offshore bidding. The bid round included four blocks in the Perdido area adjacent to US territorial waters, and six blocks in the Campeche, or Salinas Basin, area to the south.
LUKOIL purchased a data package from the National Hydrocarbons Commission (CNH) as a part of a consortium with Italy’s ENI. All 10 blocks were analyzed in terms of technology and economics, and the consortium decided to only bid on a project called Block 9.
“It was LUKOIL’s expertise that identified Block 9 as being the most attractive block in the bid round,” said Black. “This was determined by a comprehensive analysis of the regional geology, the creation of a set of detailed structural and stratigraphic maps to cover all prospects within the block and the use of Monte Carlo analytical techniques to frame the range of potential resource volumes that might exist.”
However, in the end, the winning bid was made by a consortium of Murphy, Ophir, Caragali and Sierra. “It is important to note that Statoil, Shell [which were runners-up – OJ] and Murphy are companies with extensive experience in the Gulf of Mexico. Shell is the largest producer in the Perdido area. This demonstrated that LUKOIL’s technical evaluation was focused on the best prize as seen by all bidders,” added Black.
“We recognized how spirited some of our experienced competitors were, especially with growing optimism for higher oil prices in the near future,” he added. “Mexico is planning its next deepwater licesing auction for mid-year 2017. The experience gained from working with ENI and from participation in the bidding process provides many tangible benefits to LUKOIL which can only improve our ability to be successful in future licensing rounds, not only in Mexico.”
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