Cayros - Company Report

COMPANY REPORT

Company Report Table of Content

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View From the Top Francisco Caycedo | Regional Director Latin America Cayros Group

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View From the Top Miguel Pérez | Mexico Country Manager Cayros Group

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Analysis How To Choose Offshore Structures

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Analysis Ranking Dehydration & Desalting Technologies

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Analysis What Contracting Model is Best for Upstream Success?

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Spotlight Seismic Geometric Decomposition Technology: Cayros’ Unique Tool

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Spotlight Cayros: Field Development, Planning Expertise and Technology

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Q: What is the basis of Cayros Group’s success?

A: Initially, there were two companies, Cayros Solutions and Cayros Software, the former offered consultancy services and the latter provided technology development. We decided it was better to merge these two divisions and create a single company, which is how Cayros Group was born. This integration allows the divisions to have closer interactions and to learn from each other.

As Cayros Solutions uses commercially available software for its consultancy services, it finds potential areas for Cayros Software to develop applications or plug-ins to improve its workflows and be more efficient. As these tools are created based on market demand, they allow Cayros Solutions to work better.

Q: What tool are you most excited to introduce into the Mexican market?

A: We offer a tool called C-Fields© that was developed specifically for the Mexican market. This product was born thanks to several projects on which we worked previously, which we found were taking too long to develop due to their multidisciplinary approach that required consolidation and analysis of a great deal of information from several departments. To solve this issue, we decided to create a platform capable of integrating information and interacting with several departments. This platform can integrate data from G&G, reservoir engineering,

Francisco Caycedo

drilling, production and surface facilities to quantify the risk and economic value of oil fields under different development or optimization scenarios. Basically, our platform helps operators to consolidate and present information in the best way possible

Regional Director Latin America Cayros Group

so they can make informed decisions while saving time and money. Of course, C-Fields© does not substitute the specialized software used by each division inside a company but integrates the information, making it even stronger.

Market-Driven Solutions for Field Development

Q: What challenges have emerged when developing and testing the C-Fields© solution?

A: There were several challenges. For example, the constant changes in the fiscal regime that were put in place during CNH’s licensing rounds. To deal with this issue, we created a platform flexible enough to allow us to easily incorporate changes.

Also, when changing information to create a proper analysis there are many internal and external factors that have to be considered. Having carried out this process on a case-by-case basis in many fields, we have the experience to implement the required changes to always find and offer the best solution. All in all, I have to say that we are going through a constant learning process, which pushes us to become a better solutions provider for the industry.

Q: What makes Cayros Group a unique company in the Mexican market?

A: Cayros Group bases its strengths on its people, who are world-class engineers with over 20 years of global experience in the oil and gas industry, as well as with a strong background

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in Mexico. Our teams have a mixture of backgrounds and knowledge that ensure the best solutions are always provided. We want to become the reference company for field development planning on the national and, hopefully, international level.

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Q: How will Mexics play into Cayros Group’s global portfolio moving forward?

A: Given the unique situation that the world and Mexico are facing, Cayros Group has partnered with its strategic alliances in the public and private sectors to strengthen its position in Mexico. As long as the studies we perform for our clients in Mexico help to increase their fields’ productivity, mitigating their risk and leading them to reevaluate their business plans in positive ways, we can make sure that Mexico continues to be of great importance in Cayros’ global portfolio. Low oil prices have definitely made us look for new opportunities in Northern Africa and the Middle East. Nevertheless, this has not represented a decrease in activity or attention at our Mexican operations.

Q: How are you planning to connect with private operators entering their field development phases?

A: We have had several meetings and approaches with significant players in the private sector. Unfortunately, this is not the best moment to give a final answer to that question, since a lot of these interactions and conversations with private operators have had to be paused for the time being given the market situation. However, the interest in our tools is quite high, and we can expect to see that translate into increased demand toward the end of the year. They have some concerns,

Miguel Pérez

for example regarding our data management, but we have demonstrated to them that our business with PEMEX and other public players has complied with the highest security and confidentiality industry standards through which their data is

Mexico Country Manager Cayros Group

handled. This includes data delivered to CNH. Q: How have PEMEX and other operators reacted to your tools, such as the C-Fields© software?

Efficiency in Field Development More Necessary Than Ever

A: PEMEX has welcomed our technology because they have had great results using it. PEMEX is approached by many data technology companies but our tool is unique and of great use to them because its main focus is the effective integration and development of data rather than simply data generation, analysis or evaluation. We do not know of a tool that can perform these functions in a manner similar to C-Fields© and that can address so many segments of upstream operation, ranging from facility maintenance to production drilling. It also helped that we worked extensively with IMP on the successful reconfiguration of production methodologies for Cantarell.

Q: Which of your projects best illustrates the company’s abilities and capacities?

A: We are working on a project in collaboration with PEMEX and IMP, focused on shallow-water fields. We are developing secondary recovery systems through a FEED (Front-End Engineering Design) methodology to focus our analysis on economically feasible models for the exploitation of these fields that produce ultra-heavy crude, which represents an enormous technological challenge. The choice and development of new

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offshore separation, dehydration and desalination technologies will be crucial here, especially since they will have to be integrated into a secondary recovery system with possible water injection capabilities. In this case, there is the possibility of designing an ultra-efficient closed-circuit system.

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How To Choose Offshore Structures In these times of tight budgets and tighter profit margins, offshore field development needs to be as optimized, efficient and sustainable as possible. Today, operators must identify the specific needs of their exploration and production plans, scenarios and methodologies to accelerate the development process and achieve first oil quickly enough to make projects economically feasible.

Projects either generate or lose most of their entire lifecycle value during the planning stages. Bad choices made during these phases are extremely hard, if not impossible, to remediate during execution. One of these key choices is the selection of offshore platform structure. The spectrum of available choices can be excessively broad. However, certain prevailing characteristics of Mexico’s oil and gas landscape can help narrow down the list.

A recent study by Cayros Group analyzed the best offshore structure for shallow-water greenfield project developments, using data gathered and processed by its C-Fields© software solution. The study demonstrates that the best overall broader type of offshore structures for these circumstances (defining shallow water conditions as composed of a maximum water depth of 300m) tend to be fixed platforms and fixed production systems. These structures get their name from being fixed to the ocean floor with concrete or steel columns attached to massive concrete piles. Fixed platform structures are characterized by higher degrees of stability and loading capacity, which can support higher volumes of production and higher integration of ducts from a larger number of wells. These are all considered favorable conditions for the development of fields with reserves as high as those in the Campeche Basin fields. Fixed production systems also reduce maintenance costs and expenses created by the need for future well interventions.

Cayros Group based its study on an extensive economic and technical analysis. The results show that the Top 2 fixed platform structure designs are known as “light marine” and “octapod.” Light marine structures are supported by four columns, have a loading capacity between 500 and 1,000 tons, and are the best choice for the development of fields that involve production from one or two wells. Octapods are supported, as their name indicates, by eight columns, may have two to three separate decks, a loading capacity of 2,500 to 4,000 tons and are ideal for the development of fields involving production from three or more wells.

C-Fields© is a planning tool with different modules that allow the design, evaluation and optimization of different field development scenarios. This technology allows the integration of information from different disciplines to optimize the process of making timely, strategic decisions and reduce the Read the complete article More about this topic

time required for the comprehensive and interactive evaluation of field development plans, as well as their respective documentation.

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Ranking Dehydration & Desalting Technologies Offshore oil and gas production in Mexico depends on onsite processing facilities and equipment. Among the most important tasks that these facilities perform is that of dehydrating and desalting the crude oil that is produced on a daily basis. Associated saltwater highlights crude’s most undesirable characteristic from an infrastructural perspective.

Its corrosive properties increase wear and tear on ducts and processing equipment, while limiting an operator’s storage and transportation options. Higher volumes of water in oil can also increase its viscosity, which creates the need to inject more pressure into the system to move the oil through ducts, pipelines and other facilities, which in turn increases operational costs and reduces efficiency and profit margins. As a result, this conditioning is essential.

In Mexican offshore reservoirs, the presence of water and salt is prominent in the heavy crudes that make up the majority of the country’s daily production. The most immediate and applicable strategy to address this issue is to systematically reduce or shut down production from wells where the presence of water and salt is at its peak. Unfortunately, this strategy is also at odds with the government’s ambitions to increase production. The only option is to be as smart and as efficient as possible when making necessary investments in dehydration and desalting equipment and technologies. These components must guarantee that oil production meets Mexico’s requirements for crude’s entry into the international market. Those requirements are: water content must not exceed 0.5 percent of the crude’s volume and salt content must not exceed 50 PTB (pounds per thousand barrels).

In this context, Cayros presents a new study in which dehydration and desalting technologies are ranked according to a number of criteria relevant to operators looking for the most economical option. The study begins by identifying and describing down to its scientific and operational requirements six technologies in the following category: three-phase separators, chemical treatments, thermal treatments, gun-barrel separators (also known as wash tanks), mechanical centrifugal separation and electrostatic separators.

The study ranked these technologies by applying a polling system designed through Cayros’ access to offshore operational data. This system applies one of four ratings (Low, Medium, High and Very High) to the technology. After analyzing and weighting the results, a clear winner emerged: from a technical and economic perspective, electrostatic separators proved to be the best option while thermal treatments were the least convenient.

It is important to not interpret these results as the beginning of a conversation that can implement quantitative data already generated or to be generated and qualitative data, such as the experiences of operators in Mexico, which will become much more diversified as PEMEX becomes one among other oil and gas producing entities in the country. These experiences will Read the complete article More about this topic

help contextualize data so that this linear ranking can turn into operational advice, allowing operators to choose the best technology for a specific field and even for a specific well.

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What Contracting Model is Best for Upstream Success?

After the enactment of the Energy Reform in Mexico, hydrocarbon exploration and production projects were able to participate with state enterprises (PEMEX), or through private contracts and association between parties. The reform also resulted in the establishment of the Hydrocarbon Revenue Law (HRL). Its objective is to establish “the tax regime that determines the revenue to be received by the Mexican government as a result of hydrocarbon exploration and production activities executed through assignments and contracts ... .”

The mechanisms in which exploration and production activities are conducted define the process through which the state collects revenue. According to the second article of the HRL, activities take place through an an assignment or a contract.

The payment of rights and taxes for the assignment model presents some similarities with the payment of benefits and taxes in the contract-based model. In both models, the payment of rights to hydrocarbon exploration has to take place (meaning a contractual tax on a project’s exploration phase), along with payment of rights to hydrocarbon production (usually in the form of royalties), payment for rights to shared profits (meaning a percentage of operational utilities), payment on a general tax on all hydrocarbon exploration and production activities and payment of income tax. Contracting models allow the party to avoid an additional dividend to the state, which applies to the assignment model. Through assignments there is no payment for a signing bonus, which applies to licensing contracts.

Although payment of rights and taxes in the assignment model presents similarities with the models based on compensation and taxes designed for contracts, there is considerable variation from one contracting model to another. This is why establishing which fiscal model is more convenient for the exploration and production of a field depends on a comparative economic evaluation that contains the parameters established by HRL for each model.

The study made for the exploitation of a new field based on a model developed in 2020 within Cayros Group Mexico’s C-Fields© software, which allows for the integration of CAPEX and OPEX, demonstrates that production-sharing and licensing models are the best schemes for exploitation, especially in a low hydrocarbon price market and the exchange rate between the peso and the dollar. The study demonstrates that these models allow contractors to recoup costs in a short period of time, guaranteeing profit maximization at the start of production.

The main advantage of the C-Fields© software is that it allows for the integration of information from a variety of different disciplines implicated in the generation and optimization of development plans for both new and mature fields. This allows for the realization of an interactive analysis of different feasible Read the complete article More about this topic

scenarios that are later hierarchized according to criteria that take into account fiscal models and risk models. This is done to identify and document the best option in the least possible time.

SPOTLIGHT

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Seismic Geometric Decomposition Technology: Cayros’ Unique Tool Cayros’ Seismic Geometric Decomposition (SGD) technology reveals internal subtleties that cannot be resolved by legacy seismic. Its proprietary workflows, which can delineate both the geometry and the vertical extension of the reservoirs, will yield new seismic volumes to support, optimize and validate well planning and positioning. More detailed surface interpretation, detailed fault mapping and rock property volumes can be accommodated using this process. Processes can run both in the PostStack and in the Gather domain, and the technology has been proven in more than 150 fields from many basins around the world. It has helped to better understand the lateral and vertical complexities of the reservoirs and to improve both well positioning and production efficiency.

These proprietary workflows include: PCE (Principal Component Enhancement): Spectral Decomposition, along with deep learning algorithms, are used to generate a conditioned version of the original seismic in which random noise is reduced, vertical resolution is increased and lateral reflector continuity is improved. The deep learning algorithm is supervised by logs that are generated by applying an optimization function that minimizes the error between synthetics and seismic traces at well locations. PCE increases the vertical resolution of the original seismic by structural oriented filtering of each of the main bandwidths of the spectrum. Only the components (or nodes) that contribute the most to the stack are kept (through deep learning). The neural network is supervised by pseudo logs obtained via an optimization function that tries to match the seismic response to the P-impedance logs.

VD (Vector Decomposition): In this case, a different approach for Spectral Decomposition is applied. The original seismic trace is reconstructed by using a combination of bandwidths Read the complete article

based on 21 frequency vectors (or components). An optimization function is obtained by stacking only the vectors

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SPOTLIGHT that contribute the most to resolve the vertical variations observed in the P-impedance log. The result is a seismic vintage that increases the vertical resolution of the input seismic (PCE versions are used in general) by honoring its native phase. Again, the main original onsets are preserved by the process, meaning that prior surface interpretations might be used.

SGD High Frequency Enhancement: This is the result of applying a series of equations to delineate the internal geometry of seismic traces. A high frequency pseudo reflectivity volume is generated by the combination of complex trace attributes from the Hilbert transform. Later a convolutional model is constructed, wavelet frequencies are selected based on the best match with synthetic seismograms from wells. These types of vintages in general are used to fine-tune the reservoir segmentation and to optimize curvature analysis.

SGD Layering: This is a seismic version to be used for internal reservoir pattern recognition. It might help to support well correlation. The SGD High Frequency is used as an input to a thin layer sparse spark inversion. The result is a pseudo reflectivity that captures subtle internal changes from original seismic traces. Truncations and lateral thickness variation can be better delineated.

SGD Synthetic Reflectivity: This is a process that uses either linear regression or deep learning algorithms to honor synthetic seismograms from key wells. It is a seismic volume with relative amplitudes that might support both well correlation and detailed surface interpretation. The synthetic wavelet frequency threshold is selected based on the minimum dominant frequency required to resolve main vertical variations observed in P-impedance logs.

In the Mexican market, SGD technology has been successfully used in over 20 fields. Cayros has a proven track record of impeccable projects developed in a timely manner through the application of this patented technology.

SPOTLIGHT

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Cayros: Field Development, Planning Expertise and Technology CAYROS is an independent company specialized in providing consulting services and technical support to the exploration and production segments of the oil and gas industry. CAYROS believes that the best opportunity to make a positive impact and create value in the lifecycle of large capital projects is in the early planning or front-end development stages, well before incurring capital expenses. These early stages of a project are where most value is created or lost. Poor decisions here cannot be recovered during the project’s execution. To maximize a project’s value and minimize risks during its execution, the Field Development Planning process needs to be performed optimally to avoid being overly expensive and unnecessarily time-consuming.

This is where CAYROS has world-class expertise: the application of gamechanging proprietary technology to ensure projects are developed efficiently.

C-Fields© is a Field Development Planning tool created by CAYROS. It is suitable for virtually any type of oil and gas project, from onshore to offshore environments to access conventional or unconventional resources. C-Fields© integrates information from various disciplines to quantify the economic value of the oil fields under different development scenarios. The benefits of C-Fields© include: + Timely access to technical-financial information that can be adjusted and updated interactively to facilitate strategic decision-making regarding development options. + Quantify the impact of different deviations from the base case upon various economic indicators of the project. This enables optimized decisionmaking and risk mitigation throughout the entire project process. + Significantly reduces evaluation time and cost.

Workflows manually developed on different platforms, with multiple spreadsheets and databases, can be transformed into efficient, accurate, reliable and flexible processes that allow operators to significantly reduce development time and cost.

In the Mexican market, C-Fields© has been successfully utilized in over 70 projects on 40 fields. CAYROS has a proven track record of impeccable Read the complete article

projects developed in a timely manner through the application of this proprietary technology.