Mexico offers to multinational companies the richest oil region

Chicontepec

Chicontepec

The crown jewel of the oil in Mexico is called Chicontepec. This is a region of 3,800 square kilometers in the northern states of Veracruz and Puebla whose surface contains 40% of the country’s hydrocarbon reserves. After the approval of the energy reform, which allows for the first time in 76 years private investment in Mexico’s oil industry, this area is almost entirely available for the installation of private companies on its soil. Of the 169 energy fields that the Secretary of Energy of Mexico offered to new industry participants from next year, 90 are located there.

Chicontepec might be considered the treasure of 139,000 million barrels more headaches has given the Mexican government. A mine of oil discovered since 1926, in which work began 30 years later and never been able to obtain significant quantities of oil for its geological complexity. Petroleos Mexicanos (Pemex), as a former manager of the entire oil industry in the country, he found a huge reservoir where oil was in rocks with low porosity and permeability, in a soil with low pressure to remove many barrels of oil. Until 2012, the Mexican oil achieved there an unstable production of 74,000 barrels per day when star fields like Cantarell, Ku Maloob Zaap, in the Gulf of Mexico, have managed more than 800,000 barrels per day.

The administration of former President Felipe Calderon tried in its mandate (2006-2012) to give a boost to the region with a shy little energy reform allowed private companies involved in the industry as service providers. “Chicontepec is a successful project that is giving to the future viability of the oil industry in Mexico,” said the former president on November 25, 2012, five days before leaving office. Those plans never crystallized. “They are very small reservoirs that require new technology, most probably fracking (hydraulic fracturing). The challenge and the technological risks are high and only a company with experience and knowledge of the subject and could risk involved”, says Dante San Pedro, energetic lawyer who participated in the drafting of the 2008 reform.

Pemex in 2013, made ​​available six major oil fields in the area and offered incentive contracts where extra per barrel crude obtain would get a fee of up to $ 6.5. The offer is only interested in three companies: Baker Hughes, Weatherford and Halliburton. The latter reduced its payment to a penny per barrel and three fields were deserted. Rumors that the president, Enrique Peña Nieto, soon would have the energy reform initiative pushed back several companies in the hope of getting better contract conditions in the future. Now it’s a business that can suit all of these companies. “For the technological challenges of Chicontepec think that energy reform could create better conditions for existing businesses migrate to new types of contracts”, says Miriam Grunstein, Academic Center for Economic Research and Teaching (CIDE).

The complexity of the Chicontepec field is not a secret, in 2010 the National Hydrocarbons Commission (CNH) produced a controversial report on the region in which he noted that not only the technical difficulties were a problem but also the high cost of compensation for the population there lives as well as the environmental risk to the region when intervention is needed is extremely aggressive. In the same report, the Commission harshly criticized Pemex not meet expectations: “Pemex decided to implement a drilling program in different parts of Chicontepec paleochannel, although they had limited knowledge of the characteristics and the dynamics of the deposits in the project. That investment decision lacked appropriate control mechanisms to correct implementation”, says the text.

Pemex’s mistake, according to the lawyer San Pedro, was the confidence that their former managers had in the future been able to reach operating Chicontepec. “The site was developed with those new technologies incorporating what would be making more profitable. The reality is that the numbers do not lie, do not let money Chicontepec. Pemex has been more of an expense than a utility”, he says. The undersecretary of Hydrocarbons, Lourdes Melgar, acknowledged in meetings with the international press that the work in this field “has not been successful.” Now the Mexican oil will stay in a small portion of the site waiting for a partnership with a company with the technical capacity to work there.

Put hopes that energy reform will be key to the launch of the Mexican economy (the government estimates growth of 1% of GDP by 2018 and investment of 50,000 million) is pending that administration of Peña Nieto design contracts with the legal and economic conditions for companies interested in Chicontepec raise your hand.

The Latin American community, follow this case very closely, as the site of the Vaca Muerta in Argentina.
The opening to large multinational companies for major oil fields exploitation puts governments in situations of temptation to bring new investments. On the other hand, the citizens, want to be cautious about the possible ecological impact.
People have to worry. In Argentina, some parts of contracts with Chevron are secret.
Mexico has the opportunity to show that you can do these public contracts by making them more transparent. But more importantly, for me, is that they are not as complex legally. The simplicity of contracts with the state, is one way to ensure transparency and compliance monitoring by citizen.

Illustration takenfrom: Reservoir Formation Damage Assessment in the Chicontepec siliciclastic oil-bearing reservoirs, Mexico Faculty of Environment

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