Pemex: Taming the untamable, Part II

Offshore Mexico
Offshore northeast region
The Offshore Northeast Region is on the continental shelf in the Gulf of Mexico (GofM), and extends north from the Bay of Campeche off Tabasco and east around the Yucatan Peninsula to central Quintana Roo. The region covers an area of over 166,000 sq km (64,000 sq miles) with water depths of up to 200 metres (650 ft). The region comprises three producing areas: Cantarell, Ek-Balam and Ku-Maloob-Zaap. To date, 14 fields have been discovered, of which 10 are currently producing while the other four are not, but contain residual reserves.
Three development projects in this region include the modernization and optimization of Ku-Maloob-Zaap and Ek-Balam, which involves the drilling of additional wells, fluid injection, implementation of artificial lift systems, and optimization and automation of existing facilities. Campeche Oriente is the sole exploration project in the region. There is one production project involving the modernization and automation of the facilities on the Atasta and Ciudad Pemex platforms.

The Cantarell complex, the eighth largest petroleum complex of fields in the world in terms of proved reserves, is located approximately 75 km (47 miles) northeast of Ciudad del Carmen, Campeche, with water depths of 35-50 metres (115-165 ft). It covers an area of 162 sq km (63 sq miles), spanning three salt domes, and includes five fields: Akal, Chac, Nohoch, Kutz and Takin, the first three being producers. The primary goal of the project is to modernize and optimize the infrastructure of the Cantarell area and maximize the economic value of its reserves. As of Dec.31.2002, 354 wells had been drilled, 193 of which were producing.
PEP awarded a build-own-operate contract for a nitrogen cryogenic plant in Cantarell in Oct.1997 to a consortium formed by BOC Holdings, Linde, Marubeni, West Coast Energy and ICA Fluor Daniel. The consortium has legal ownership of the plant and PEP has committed to purchasing 1.2 bn cfpdof nitrogen for a 15-year period in a deal valued at $ 2.7 bn. The $ 1 bn plant began operations in 2000. PEP plans to inject 1.2 mm cfpd of nitrogen into Cantarell reservoirs until 2009 and thereafter there would be a gradual decline until 2015. Currently, the existing surplus is injected into other fields offshore.

The goal of the injection program is to increase oil recovery rates, which should in turn help maintain pressures during the oil extraction process. By maintaining favorable recovery rates in Cantarell, PEP expects to yield long-term benefits including increasing the productive life of the wells and the amount of recovered oil. With the new plant and a 70-mile pipeline system in place at Cantarell, PEP expects to recover an additional 2.3 bn barrels of oil from the area. Cantarell also has significant associated-gas reserves; however, because of the absence of an offshore gas transport infrastructure, most of the gas is currently flared off.
In the event the agreement is rescinded due to acause imputed to PEP, the company will be obligated under the agreement to purchase the nitrogen production plant, the estimated value of which is approximately Ps$ 8,310 mm.

Ek-Balam is located off the coast of Campeche. It covers an area of 43 sq km (17 sq miles) and includes five fields: Ek, Balam, Bacab, Ixtoc, and Lum, of which Lum is the only one that is not currently producing. The primary goal of the project is the optimization of production in Ek and Balam through artificial lift systems, such as electric submergible pumps, and a pressure maintenance project aimed at recovering additional volumes. As of Dec.31.2002, 35 wells had been drilled, five of which were producing.
Ku-Maloob-Zaap is located off the coast of Tabasco and Campeche, 105 km (65 miles) northeast of Ciudad del Carmen, Campeche. It covers an area of 121 sq km (47 square miles) and includes four fields: Ku, Maloob, Zaap and Zazil-Ha. Ku, Maloob and Zaap fields produce from the Kimmeridgian, Lower Paleocene-Upper Cretaceous and Middle Eocene reservoirs.

Zazil-Ha has residual reserves and is not currently producing. The Ku-Maloob-Zaap project covers the Ku, Maloob and Zaap fields with the primary goal of optimizing reserves in the area. Several projects have been planned, including drilling a large number of new wells; constructing an infrastructure to handle the production of residual reserves; optimizing facilities for hydrocarbon surface handling; implementing a pressure maintenance process through gas injection; gathering 3-D seismic data; and the upgrading of a numerical simulation model.
Ku-Maloob-Zaap has a gathering platform, seven drilling units, four accommodation platforms and gas compression facilities. Most of the engineering for this area is being carried out by the Mexican Petroleum Institute. Plans for the area include installing 32 additional subsea pipelines. As of Dec.31.2002, 61 wells had been drilled, 40 of which were producing.

Recent developments
In May.2003, Technip was awarded the front-end engineering and design (FEED) contract for five 8-legged production platforms to be located in the center of Ku-Maloob-Zaap. ICA Fluor Daniel’s Mexican subsidiary won two of the contracts while US-based Halliburton KBR and Mexico’s CPI Ingenieria each won a contract. All of the Ku-Maloob-Zaap projects are aimed at exploiting the area’s estimated 5 bn barrels of heavy oil reserves.
Orders are expected for 17 platforms for the Ku-Maloob-Zaap project and 15 platforms for the Tabasco Litoral project (discussed below), including production platforms and gathering, drilling and accommodation units. Combined, these two projects are expected to add 600 mm bpd while the Tabasco Litoral project is expected to add an additional 700 mm cfpd.

Ku-Maloob-Zaap is expected to be connected to the same nitrogen injection system that is being used in Cantarell, where production has nearly doubled to more than 1.8 mm bpd as a result of the nitrogen injection. Additionally, exploration and development projects will be carried out in the Tabasco Litoral region. Another project, Ixtal, covers some oil fields in the Bay of Campeche, which are expected to produce 60 mm bpd of light oil with some associated gas.
In 1999, PEP announced the discovery of Sihil, underneath Cantarell. Sihil contains primarily heavy oil in Cretaceous structures and light oil in Jurassic formations, and has estimated reserves of at least 1,000 mm boe. Sihil currently produces 25 mm bpd, but PEP expects this to increase to 60 mm bpd in the near future. An appraisal program is being undertaken.

Offshore southwest region
The Southwest Offshore Region lies in the GofM, on the continental shelf, and extends from offshore Belize, around the Yucatan, to Veracruz near the refinery-port city of Coatzacoalcos. The region is rich in associated gas and covers an area of 352,390 sq km (136,060 sq miles) with water depths from 200-1,000 metres (650-3,300ft).
The petroleum-rich areas in this region include Abkatun, Pol-Chuc and Tabasco Litoral. These areas have been exploited for more than 15 years and share a common aquifer. A water injection system was implemented in Mar.1991 to maintain reservoir pressure. The region has a total of 28 known oil fields, of which 10 are producing and 18 are non-producing with residual reserves.

Main projects
The five main production projects include: Crudo Ligero Marino (offshore light crude oil), optimization of Chuc and Abkatun fields, optimization of the Dos Bocas offshore terminal and the Pol field project. The projects involve the drilling of wells, implementing enhanced recovery mechanisms and artificial lift methods, and optimization and automation of facilities. The main goal of the projects is to improve the profitability of the operations.
The Dos Bocas offshore terminal houses the headquarters for the administrative offices of the Abkatun, Pol-Chuc and Tabasco Litoral management divisions and receives most of the oil produced offshore in the Bay of Campeche. The facilities currently handle approximately 1.5 mm tons of solid and liquid materials per annum.

Abkatún-Pol-Chuc Complex is made up of three fields in the South-western offshore region which extend over an area of 198 sq km. As of Dec.31.2002, there were a total of 188 wells drilled, 35 of which were injectors. Currently, there are 46 producing wells.
The Abkatun area includes six fields: Abkatun, Caan, Taratunich, Kanaab, Ixtal and Manik, the last two currently not in production. Since the oil recoveries have increased with the implementation of a water injection pressure maintenance program, the most important project in this area consists of continuing to develop water injection programs.

The strategy includes drilling additional horizontal and directional wells, implementing a special gas lift system and installing two remote separators, with the purpose of recovering more of the remaining oil in the reservoir. As of Dec.31.2002, 41 wells had been drilled, 22 of which were producing in the Caan field.
The Pol-Chuc area includes six fields: Pol, Chuc, Batab, Toloc, Kay and Che. The first three are currently producing and the development of the others is planned for the future. The fields are located northeast of the Dos Bocas offshore terminal. The goal of the Pol project is to recover hydrocarbons from the Paleocene and Cretaceous Breccia formation in areas not yet drained, and optimizing the production infrastructure in the Pol field.

Plans for Pol include the drilling of development wells, performing major workovers, building a pipeline, installing a remote separator, modifying headers in eight drilling platforms, implementing automation on nine platforms, installing a four-legged structure for control and services, and installing a similar structure containing equipment needed for crude dehydration and waste water treatment. The Chuc field has three hydrocarbon recovery structures, each connected to its own pipeline nearly 20 km long. The field has 23 wells: 18 are producers, 4 have suffered drawdowns and 1 is used as control. The goal of the Chuc project is to recover 212 mm boe in the Paleocene and Cretaceous Breccia formations by drilling additional wells, establishing gas lift methods and implementing enhanced oil recovery techniques.
The Tabasco Litoral area contains the Alux, Ayin, Bolontiku, Citam, Hayabil, Kab, Kax, Kix, Makech, May, Mison, Och, Sinan, Uech, Yaxche and Yum fields, of which only Och, Uech, and Kax are currently producing. These reservoirs are important as they contain light oil with significant volumes of associated gas. Plans for the Litoral are aimed at increasing production in the short term and developing fields already discovered but not yet exploited.

The Tabasco Litoral fields are located on the continental shelf in the GofM, off the coast of Veracruz and Tabasco. The area covers 19,490 sq km (7,525 sq miles) and contains four offshore basins: the Catemaco fold-belt, the Salina del Istmo, the Tabasco Litoral Mesozoic and the Comalcalco Tertiary. Two current projects are the Coatzacoalcos project, for the evaluation of potential reserves, and the Litoral project, for detailed resource appraisal.
Exploration is being undertaken in the Bay of Campeche off the coastlines of Veracruz, Tabasco and Campeche States, in water depths of up to 500 metres (1,600 ft). The area covers approximately 230,000 sq km (88,000 sq miles) and includes two projects: Gulf of Mexico B and Campeche Poniente. The boundaries of the two projects were designed so as to balance resources and to reflect the geological structures of the basins. The organizational structure of each project comprises four technical areas: exploration, delineation and initial characterization of the reservoir, evaluation of reservoir potential and detailed resource appraisal.
The GofM B is in the exploratory process of basin analysis and definition stages for the oil system, while the Campeche Poniente is in the detailed resource appraisal subprocess.

Recent developments
In March 2002, PEP announced new gas field discoveries at Lankahuasa, Playuela and Hap, all offshore Veracruz. Pemex estimates that collectively the three fields could result in a 25 % increase in Mexico’s gas reserves.
Lankahuasa is located in the shallow waters of the Poza Rica region. The discovery well, drilled to a total depth of 3,670 metres (12,040 ft), revealed a new reservoir in the upper Miocene section of the Tampico Misantla basin. The subsequent drilling of two exploratory wells and one appraisal well yielded proven reserves of 400 bn cf.

The contract for the production platform was won by ICA Fluor Daniel, while Protexa, a Mexican construction company, won the contract to build a 25 km (15 mile) pipeline to connect Lankahuasa to the shore. PEP has identified 30 other exploratory prospects in Lankahuasa, in addition to 74 in the adjacent Lamprea region. Lankahuasa is estimated to hold up to 1 tcf of reserves and is expected to come online in 2004 at 109.5 mm cfpd.
Recently, PEP spud the Kosni prospect, located east of Lankahuasa. The initial well was drilled to a total depth of 5,450 m (17,880ft) and showed oil bearing potential. PEP plans to move further south to drill the Canonero prospect, followed by other wells in the Faja de Oro, Lankahuasa South and Lankahuasa Deep blocks. PEP estimates the area could hold reserves of 3-7 tcf.

In the Litoral, PEP plans to add 15 platforms, including four producers in the Sinan field, two in May, one each in Citam and Bolontiku, as well as five drilling platforms and three to four accommodation units. Installations are expected to be completed by Jun.2006. Production in the Litoral is currently transported to a single platform in the Yum field. Expansion plans for the area are expected to add 200 mm bpd and 700 mm cfpd.
Packages for the May A and B production platforms were tendered in Mar. 2003 with construction to commence in Sep.2004. Initial oil is expected to come online by Dec.2004. Firms active in the area and looking to compete for the platform contracts include: C-Bay, CMM/Commsa, Dragados of Spain, ICA Fluor Daniel, Halliburton KBR and J. Ray McDermott.
Thirty-two exploratory and development wells are planned in the Litoral. The Nak #1 and Mison #101 wells, the first two wells drilled in the area, both encountered light oil and associated gas in Lower Cretaceous carbonates at depths of 4,500 metres (14,760 ft).