The Journey to New Oil in Mexico’s Offshore Scene

Private oil investments remain stagnant in Mexico due to the suspension of bidding rounds for more private E&P projects. Nevertheless, private companies continue to strike oil in previously granted areas.

Eni announced on March 17, 2023, that it discovered oil offshore in Mexico once more. The Italian oil giant found a 200MMboe deposit in Block 7 of Yatzil in the Southeast Basin. The discovery is 65km away from the coast and 30km away from other discoveries.

Eni drilled the well using the Valaris DPS5 semi-submersible drilling rig in water 284m deep. The well was drilled to a total depth of 2,441m. The Yatzil-1 EXP discovered over 40m of good-quality net oil production, with excellent petrophysical properties confirmed by extensive subsurface data collection.

“[The discovery is] located in the mid-deep water of the Cuenca Salina in the Sureste Basin, offshore Mexico. According to preliminary estimates, the new finding may contain around 200MMboe in place,” wrote the company.

“The successful result comes after the Saasken and Sayulita discoveries in Block 10 and confirms the value of Eni’s Mexican asset portfolio, contributing to the potential synergic cluster development of several prospects located nearby,” announced the IOC.

The Block 7 exploration project is composed of Eni with a 45% stake, Capricornio with 30% and Citla Energy with 25%. ENI is among the three private operators that drive 80% of private production in Mexico.

“Eni has been present in Mexico since 2006 ... Currently, Eni holds rights in eight exploration and production blocks, six as the operator, all located in the Sureste Basin in the Gulf of Mexico,” reads the statement.

Meanwhile, On Tuesday, April 25, 2023, Wintershall Dea announced a significant oil discovery at the Kan exploration prospect in Block 30, located in the shallow waters of the Cuenca Salina in the Sureste Basin, offshore Mexico.

The company’s preliminary estimates suggest the discovery may contain between 200 and 300 million barrels of oil equivalent in place. The Kan prospect, situated approximately 25km off the Tabasco coast in a water depth of around 50m, is within a zone of several Miocene discoveries, including the Zama, Polok, and Chinwol discoveries. Wintershall Dea holds significant working interests in these discoveries. The discovery is the first of two commitment wells on Block 30.

Hugo Dijkgraaf, Wintershall Dea’s Chief Technology Officer and Executive Board member responsible for global exploration, called the Kan discovery “a great success” and stated that it confirms the attractiveness of Block 30, complementing the company’s outstanding Mexican license portfolio.

Martin Jungbluth, Managing Director, Wintershall Dea in Mexico, referred to the discovery as “the next important milestone for the company in Mexico,” following the recent submission of the unit development plan for the Zama field and the acquisition of a material share in the producing Hokchi field.

The Block 30 consortium, consisting of Wintershall Dea, the operator with a 40% share, as well as Harbour Energy and Sapura OMV, both with a 30% stake, will evaluate the extensive subsurface data collection to prepare the Kan discovery appraisal plan. The plan is expected to be submitted to CNH before the end of July 2023.

“As part of this Block 30 campaign, we will then drill backto-back another well named Ix. In addition, we will drill more wells during 2023 and 2024 in Block 4 in the Sureste basin, with Petronas as operator, and also in Block 2 in the TampicoMisantla region, with PEMEX as operator,” Jungbluth told MBN in a previous interview.

Moreover, Jungbluth said that Mexico remains a core country for Wintershall Dea’s global portfolio. The company withdrew from its Russian assets following Moscow’s invasion of Ukraine in 2022, driving it to diversify elsewhere, including in Latin America. Moreover, the company has a promising and attractive portfolio throughout the E&P value chain, with auspicious projects in the exploration and development stages, including Zama, its Polok discovery and the production projects Ogarrio and Hokchi.

Not everyone has been lucky, however, as Shell and Chevron, two major oil companies operating in Mexico, announced their decision to withdraw from projects in the country due to the lack of commercially viable hydrocarbon reserves.

Shell, under the leadership of Chairman Alberto de la Fuente, has started the process of relinquishing two contractual areas located in the deep waters of the Gulf of Mexico. “The companies indicated that the contract area, Max-1XP had limited hydrocarbon potential due to insufficient thickness and immaturity, making oil and gas production economically unviable,” said Valeria Bautista , Legal Representative, CNH.

A similar outcome was observed at the Alux-1EXP well, which revealed a restricted presence of reservoirs and thermal immaturity, further impeding production possibilities. These abandoned assets are situated in the Cuenca Salina oil province, offshore Tabasco and Campeche, and had a 35-year license.

Commissioner Héctor Moreira Rodríguez, CNH, expressed regret over the resignation of Shell and Chevron. He emphasized that oil exploration activities involve a significant level of uncertainty, despite the efforts and investments made by companies. “They invested around US$200 million and found no commercial resources. They are doing the logical thing which is to leave the area,” said Moreira.

Mexico has recently witnessed a series of prominent oil companies, including BP, Equinor, Repsol and Total Energies, abandoning their assets, indicating challenges and unfavorable outcomes in the sector. It remains to be seen whether the government will take over these abandoned fields in the future.