transforming mexico’s oil and gas sector - pesa.orgdeep water onshore conventionals total...

Aldo Flores-QuirogaDeputy Secretary of Energy for HydrocarbonsMexico

Houston, TX| October | 2017

Transforming Mexico’s Oil and Gas Sector

PESAPetroleum Equipment & Services Association

Contents

1. Progress to date

2. Next steps

2

3

1. Progress to date

4

State monopoly Open markets

In only three years, Mexico’s energy reform has deeply transformed the country’s oil and gas industry

* Not including 20 seismic research firms** Including firms investing in ducts, storage terminals and railroad infrastructure

Source: CRE, CNH y SENER.

exploration and production companies*

transportation and storage infrastructure companies**

675627 new oil products retailers

$3,187

$14,149

$34,353

$9,164

$6

0,8

53

0

7,500

15,000

22,500

30,000

37,500

45,000

52,500

60,000

OnshoreConventionals

Shallowwaters

Deepwaters

PEMEXFarm-Outs

TotalInvestment

Mill

ion

USD

5

Mexico is a globally competitive destination for E&P investment

new contracts

awarding success73%

biddingRounds8 new

companies67

prospective resources*

3372

newinvestment

3.6billion boe

~$61billion

* Risk-adjusted

Source: CNH

US companies are part of the revitalization of Mexico’s oil and gas industry

Source: CNH

6

share of expected investment

11%US investment in Mexico’s oil and gas upstream sector

$6.5 billion

$1,218

$562

$12

$4,713

$48

$6

,55

30

1,000

2,000

3,000

4,000

5,000

6,000

7,000

ShallowWater

ShallowWater


DeepWater


TotalInvestment

Mill

ion

USD

(M

MU

SD)

$22,758

$10,642

$9,633

$7,644

$6,553$1,514 $520

$5

9,2

63

0

10,000

20,000

30,000

40,000

50,000

60,000

Europe &Eurasia

AsiaPacífic

Mexico China USA South &CentralAmerica

Canada TotalInvestment

Mill

ion

USD

(M

MU

SD)

38%

18%

16%

13%

11%3%

1%

7

Two private companies have announced discoveries amounting to 3.4 billion barrels of crude oil equivalent

* 3P reserves as of January 1, 2017

Sources: CNH, ENI and Talos Energy, Premier Oil and Sierra Oil

R1.1 Área 7

Tabasco

R1.2 Area 1

Amoca-3

Amoca-2

●

R1.1 Área 7

Tabasco

R1.1 Área 7

Zama-1

●

+ 1.4 Billion boe + 2 Billion boe

Mexico’s 3P Reserves*

13%Mizton-2

●

8

The Mexican side of the Gulf of Mexico is currently the area with the largest seismic research in the world

* On average, ~ 35 firms per bidding cycle accessed the data room to assess their investment plans

Source: CNH

3D seismic improves long term business decisions *

Billion in new investment$2Companies operating20Permits issued54

~4 times 3D seismic studies prior to the energy reform

9

The natural gas market is growing more competitive

* 2006 – 2016 Note: Market value computed with 2016 data. Source: CENAGAS

INDEPENDENT SYSTEM OPERATOR

Cross-border pipelinesopen to private companies

companies reserved capacity3

market value per year

companies reserved capacity24

market value per year

Open access to the national pipeline system

Open markets

registered companies62

Market prices started in July 2017

$245million

$2.3billion

billion cubic feetper day

7.8 largest marketin the world

9th annual growthrate*3%

10

The market for US natural gas expands as Mexico’s pipeline network grows

7,092 mi1,491 mi3,161 mi

growth in 6 years66%

miles by 201811,744

Added 2013–2016

Pre-energy reform

Under construction

new investment$12 billion

11

Mexico’s LPG market became fully open in 2017

* Average of 2017** Period: 2010-2016

Source: CRE

Import permits122

74%

share of private importsin LPG market~37%

LPG imports by privatesector*

more distributionpermits since 2016

distribution companiesin 2017198

26times

storage companies20

logistics companies202

3rd largest LPG marketin the world

Free imports(2016)

Private Sector already ownsinfrastructure

Market prices(2017)

Mbd, 2016293

12

The Mexican motor fuels market is open for business

Free imports

private companies importing gasoline and diesel **39

Harmonization to North America’s fuel quality

Gradual market opening

import permits issued *

* (224) gasoline and (324) diesel ** (16) gasoline and (23) diesel Source: CRE

ethanol asfuel blender (maximum)

10%

Non-tariff barrier to entry removed

out of 32 states selling at market prices6

open season forinfrastructure completed1

548

6th largest motor fuels market in the world1,210 Mbd, 2016

Equivalent to the combined markets of Colombia and Ecuador

13

Global and local retailers are quickly expanding operations in the 6th

largest motor fuels market in the world

Monterrey

Mérida

CDMX

Tijuana

San Luis

Potosí

Tampico

Cd. Juárez

Fuente: CRE

new retailers

27service stations

1,725share

15%

Upcoming retailers

Guadalajara

Puebla

14

2. Next steps

Mexico’s five-year plan identifies 509 exploration and production blocks and 82 production fields

15

16

The upcoming offshore bidding cycles build on previous success

Source: SENER

Acreage: 30,440 mi2

Considers blocks nominated by companies

blocks29boe in prospective resources4.2

BILLION

32

times the acreage in Round 1

times the resources in Round 1

Deep waterRound 2.4

Perdido Fold Belt

Mexican Ranges

Salt Basin

17


Source: SENER


High oil and natural gas potential

blocks29boe in prospective resources4.2

BILLION

32

Acreage: 30,440 mi2 Deep waterRound 2.4

Perdido Fold Belt

Mexican Ranges

Salt Basin

times the acreage in Round 1

times the resources in Round 1

18


Source: SENER


Shallow waterRound 3.1

blocks35boe in prospective resources2

BILLION

22

times the acreage offered in allprevious shallow water rounds

times the resources awarded in allprevious shallow water rounds

Southeast Basin

Tampico – Misantla Veracruz

Burgos

Acreage: 10,140 mi2

19


Source: SENER

blocks35boe in prospective resources2

BILLION

22

times the acreage offered in allprevious shallow water rounds

times the resources awarded in allprevious shallow water rounds


High crude oil and natural gas potential

Acreage: 10,140 mi2 Shallow waterRound 3.1

Southeast Basin


Burgos

Blocks from 2.4 and 3.1 are distributed in the country’s six main oil provinces…

Perdido Fold Belt

Mexican Ranges

Salt Basin

Southeast Basin


Burgos

20

…and interact with the blocks awarded in Round 1.1…

Exploration Discovery

+ 2 Billion boe

21

…Round 1.2…

Exploration Discovery

+ 1.4 Billion boe

22

…Round 1.4…

23

…Round 2.1…

24

…Pemex’s blocks…

25

…and Pemex’s farm-outs

26

All blocks have improved 2D and 3D seismic coverage

27

28

Round 2.4 creates clusters to achieve economies of scale...

PERDIDO FOLD BELT• 9 blocks offshore the coast of Tamaulipas• Light oil and dry gas

Block Surface (km2)Prospective Resources

(Million Boe)

WaterDepth

(Meters)

1 1,988 171 500 - 1,000

2 2,146 76 1,000 - 2,000

3 2,062 115 1,000 - 2,500

4 1,900 40 400 - 2,000

5 2,733 252 2,500 - 3,000

6 1,891 171 300 - 1,500

7 1,968 17 1,000 - 2,000

8 2,062 13 2,000 - 2,500

9 2,009 92 1,500 - 2,000

Subtotal 18,758 949

Source: SENEROil

Dry gas Wet gas

29

… includes a basin with natural gas potential for further exploration…

MEXICAN RANGES• 10 blocks offshore the coast of Veracruz • Dry and wet gas and light and ultra light oil

Block Surface (km2)Prospective Resources

(Million Boe)

WaterDepth

(Meters)

10 1,999 100 400 – 2,000

11 2,002 182 400 – 1,500

12 3,099 215 1,500 – 3,000

13 1,967 179 300 – 1,500

14 2,242 180 1,500 – 2,000

15 2,042 180 400 – 2,000

16 2,047 131 500 – 1,500

17 3,010 131 300 – 2,000

18 2,917 412 2,000 – 2,500

19 3,003 281 200 – 2,000

Subtotal 24,328 1,992

Source: SENEROil

Dry gas Wet gas

30

…and areas that leverage nearby infrastructure and active blocks

SALT BASIN• 5 blocks offshore the coast of Veracruz• 5 blocks offshore the coast of Tabasco• Light and heavy oil and wet gas

BlockSurface (km2)

Prospective Resources(Million Boe)

WaterDepth

(Meters)

20 2,080 199 2,500 – 3,000

21 2,030 327 2,000 – 3,000

22 2,879 101 1,000 – 2,500

23 1,853 131 2,000 – 3,000

24 1,922 100 1,500 – 3,000

25 2,107 12 1,500 – 2,500

26 2,030 67 1,500 – 2,000

27 2,118 68 1,000 – 2,000

28 3,067 106 1,000 – 1,500

29 3,254 176 400 – 2,000

Subtotal 23,339 1,287

Source: SENER

Oil

Wet gas

31

Similarly, Round 3.1 builds clusters with nearby active areas…

Source: SENER

BURGOS• 14 blocks on the Tamaulipas coast• Mainly light oil and wet gas

BlockSurface(km2)

Prospectiveresources

(Million boe)

WaterDepth

(meters)

1 802 85 < 200

2 816 102 < 200

3 809 60 < 200

4 778 42 < 200 a 500

5 814 36 < 200

6 820 31 < 200 a 500

7 391 71 < 200

8 390 20 200 a 500

9 397 19 < 200

10 419 19 < 200

11 391 23 < 200

12 811 48 < 200 a 500

13 392 15 < 200

14 392 8 < 200

Subtotal 8,424 579 -

Oil

Dry gas Wet gas

TAMPICO – MISANTLA• 13 blocks on the Veracruz coastline• Light oil, dry and wet gas

BlockSurface(km2)


(Million boe)

WaterDepth

(meters)

15 962 42 < 200

16 785 35 < 200 a 500

17 842 34 < 200 a 500

18 813 89 < 200

19 808 45 < 200 a 500

20 817 30 < 200

21 1,103 284 < 200

22 1,138 156 < 200

23 820 31 < 200

24 791 103 < 200 a 500

25 1,170 80 < 200

26 1,225 145 < 200

27 1,218 144 < 200

Subtotal 12,493 1,217 -

32

…includes areas with potential in the historic Golden Belt…

Source: SENEROil

Dry gas Wet gas

33

…and takes advantage of supply chains and infrastructure

Source: SENER

SOUTHEAST BASIN

• 2 blocks on the Veracruz coastline• 4 blocks on the Tabasco coastline• 2 blocks on the Campeche coastline• Mainly light and heavy crude oil

BlockSurface(km2)


(Million boe)

WaterDepth

(meters)

28 808 31 < 200 a 500

29 471 0 < 200

30 528 20 < 200

31 401 51 < 200

32 1,027 64 < 200 a 500

33 581 5 < 200

34 734 8 < 200

35 798 13 < 200

Subtotal 5,348 192 -

Oil

Wet gas

34

In addition, PEMEX will offer a new deep-water farm-outopportunity

* To be certified

Source: CNH y PEMEX

PEMEX’s stake: 40% to 60%

Seeks to attract state-of-the-art technology, expertise and best practices

Risk sharing with new partners

3P Reserves: ≈ 500 Million boe*

Nobilis – MaximinoDeep-water

35

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Mill

ion

cu

bic

fe

et (

MM

cf)

Pemex contract release program

Source: CRE

Phase 1700 MMcf

(20%)Phase 2

700 MMcf(20%)

Phase 31,100 MMcf

(30%)

PEMEX contracts

1,100 MMcf(30%)

OriginalPEMEX

contracts 3,600 MMcf

(100%)

February2017

From 2017 to 2021

By 2021

More competitors will enter the natural gas market, as regulation requires Pemex to cede market share

70%of contract-holders will choose a new marketer

36

The new storage policy sets inventory requirements and will promote new infrastructure

days of supply by 2020 From to

days of supply by 2025Up to13

million barrels by 20257.8 19.6to

3 5

From

37

Motor fuels’ price liberalization will conclude by the end of 2017

Source: CRE

2

October 30th3

December 30th5

Free market prices1

November 30th4

~ Ecuador’s market

~ Colombia’s market

~ Puerto Rico’s market

~ Spain’s market

~ Uruguay’s market

Free market prices

1

5

2

34

6

38

Private investment is already driving the expansion of Mexico’s storage capacity…

* Includes storage both for logistic and storage projects** Does not include investment on rail-road logistics of refined oil products

8

Storage

5.3mmb

New companies

Projects approved by CRE9

Additional storage capacity*

New storage capacityin operation

$348 million

Investment

335 kb

Source: CRE

7

9

39

… and of combined storage-transportation infrastructure

Source: CRE

storage capacity

transportation capacity

investment$3.4 billion

12,882 kb

500kbd

40

Mexico’s new oil and gas sector is creating unprecedented business opportunities

* Including 19 companies with investments in ducts, storage terminals and railroad infrastructure and 26 natural gas marketers

Sources: CRE, CNH y SENER.

Exploration and production companies67Seismic research companies20Pipeline construction companies11Storage and distribution companies*45

billion

$2 billion

$61

billion$12billion$4

New companies143 billion$79

Without public funds| Without public debt| Sharing risks

transforming mexico’s oil and gas sector - pesa.orgdeep water onshore conventionals total...

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