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Eni adds to Mexico oil position with new Block 10 discovery

by 198 Mexico News
August 2, 2021
in MEXICO EGYPT NEWS
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Mexico City —
Eni and its partners have discovered an estimated 150 million-200 million barrels of oil equivalent offshore Mexico, the Italian company said Aug. 2, continuing its run of Mexican and global exploration successes.

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In a statement, Eni said it, with partners Russia’s Lukoil and London-listed Cairn Energy, had made an oil discovery at the Sayulita prospect in the mid- to deepwater Cuenca Salina Sureste Basin, its seventh successful well in the basin.

The Sayulita-1 well “found 55 meters of net pay of good quality oil in the Upper Miocene sequences. The reservoirs show excellent petrophysical properties,” Eni said, adding the individual well should be able to produce up to 3,000 b/d.

Sayulita, together with another drilled in 2020 called Saasken 1, confirms “the value of the asset and [opens] the potential commercial outcome of Block 10 since several other prospects located nearby may be clustered in a synergic development,” Eni said.

Eni described Mexico as a “core country” for the company, saying it was currently producing 20,000 b/d of oil equivalent in the separate Area 1 and this should rise to 65,000 boe/d in 2022 and 90,000 boe/d in 2025.

However, this represents a scaling back in ambition as Eni had been targeting 100,000 boe/d from Area 1 by the first half of 2021, according to a February 2020 statement announcing the discovery prior to the latest find.

Mexico’s National Hydrocarbons Commission, or CNH, approved Eni’s proposal to drill Sayulita in June. At the time, Eni identified 129 million boe with a 60% probability of success. Eni said at the time it will invest $28.9 million drilling Sayulita.

Mexico is one of a number of countries where Eni has scored significant exploration success in recent years, alongside Angola, Egypt and Ghana among other locations.

However, in February, responding to the challenge of low oil prices, Eni announced a new “low risk” exploration strategy in which only 12% of wells in 2021-24 would be in frontier areas, and there would be an increasing emphasis on gas finds. Mexico remains predominantly an oil play for the company.

At a July 30 results presentation Eni said it hoped to find 500 million barrels of oil equivalent through exploration this year, having already made more than 300 million boe in discoveries offshore Norway, Angola, Indonesia and Ghana in the first half of the year.

Playing the long game

The Andres Manuel Lopez Obrador administration has suspended upstream oil and gas leasing activity in Mexico, but with roughly 50 billion boe in prospective resources, upstream E&P companies are playing the long game, according to sources.

“Demand for oil will drop gradually as the world moves forward with energy transition, but some demand will remain, allowing countries with large reserves to find a market for their products,” said Marco Biersinger, a director of oil and gas corporate finance at Duff & Phelps.

Mexico, together with Guyana and Brazil, have some of the most undeveloped basins in the world, which should allow those countries to attract companies willing to take the risk to meet demand, Biersinger said. Mexico has an advantage over countries like Guyana, as there are companies that already have a firm understanding of the offshore geology on the US side, he said.


And as the US transitions away from fossil fuels, some of the capital on the US side of the Gulf of Mexico could shift to the underdeveloped Mexican side.

S&P Global Platts Analytics expects US offshore crude production to climb from 1.8 million b/d in 2021 to 2.4 million b/d in 2030, before slipping back to 2 million b/d by 2040.

While Lopez Obrador has put auctions on hold, Mexico’s legal framework remains in place, meaning those auctions could return under subsequent administrations.

“It is not positive that oil rounds were cancelled, but it is encouraging that the constitution has not been tampered with,” said Sergio Pimentel, a partner specialized in the energy sector at Agon, a Mexico-based consultancy.

The next administration could revive the rounds in a matter of weeks, said Pimentel, formerly a commissioner at CNH.

Deepwater potential

The deepwater Gulf of Mexico holds the largest of Mexico’s deposits, estimated at 23.9 billion boe, followed by the shallow-water Sureste Basin with 14.5 billion boe, CNH data shows. The deepwater Gulf has three large basins: Cuenca Salina, Planicie Abisal, and Cordilleras Mexicanas, which contains the Perdido basin.

The Perdido holds over 16 billion boe, CNH data shows.

Mexican state oil company Pemex, under the administration of President Enrique Pena Nieto, concentrated its deepwater exploration in the Perdido, drilling 34 wells between 2012 and 2018. However, that activity stopped in 2019 when newly-elected Lopez Obrador shifted Pemex’s focus to shallow waters.

There are currently 11 companies with 27 contracts in Mexico’s deepwaters. Eight of the contracts are in the Perdido area, including a joint venture between BHP Billiton and Pemex called Trion. The other 19 contracts are in the Cuenca Salina, CNH data shows, all of which are for exploration.

BHP’s Trion

Australia’s BHP operates Trion, the most advanced deepwater project in Mexico.

Trion is a field with unique characteristics; discovered by Pemex in 2012, it is located in one area of the basin where there is no salt layer, allowing for more visibility in the seismic analysis, CNH data shows.

BHP has completed its appraisal activity of Trion and will present its development plan to CNH for approval in 2022. Before the end of 2021, the company will present its declaration of commerciality and soon after that it will declare its final investment decision, BHP’s Trion project director Stephan Drouaud said in a recent presentation.

BHP expects to begin production in late 2025 or early 2026, with output peaking at 130,000 b/d, he said.

Shell is the largest holder of blocks in Mexico´s deepwater with nine permits, CNH data shows. Shell is already producing wells in the Perdido Corridor on the US side, with fields like Great White, Silvertrip, and Tobago, where it has reached peak production of 100,000 boe/d.

Repsol, Eni, Petronas and Chevron also hold exploration blocks in the deepwater Gulf of Mexico, CNH data shows.


For more than 20 years, the Global Energy Awards has recognized achievements by companies who have faced complex challenges and capitalized on unique opportunities. Nominations open June 7, nominations close Aug. 27.


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