Mexico’s Ichalkil and Pokoch production on the riseFebruary 7, 2022
Andrés Brügmann, Fieldwood Energy’s director-general for Mexico, talks to The Energy Year about the industry’s recovery and recent advances in the offshore Ichalkil and Pokoch field projects. Houston-headquartered Fieldwood Energy is an E&P company focused on the Gulf of Mexico, where it is developing Area 4 as operator in a contract under Lukoil’s corporate control.
What impact has the pandemic had on the industry and what green shoots do we see?
The last two years have been very difficult for the industry. We experienced low prices and continuous disruptions across the value chain due to the pandemic. The good news is that we’re at a turning point. We are seeing prices improve with the barrel of oil stabilising at USD 70-80 and global logistics recovering.
Furthermore, the E&P sector needs continuous investment in exploration and development and in the past two years the industry did not receive the investment needed to sustain production at current output, so this will probably push prices higher in the midterm.
Therefore, I am confident there will be significant opportunities in the global industry and Mexico. In 2021, there were seven successful exploration wells in Mexico and although these finds will take time to materialise into production, I am confident most of these prospects will be developed in the three to five years. The level of investment committed during this period is going to determine new reserve additions and production output for the country by the end of the decade.
What approach has the investment community adopted when betting on oil and gas capitalisation?
Due to the energy transition, the days of massive bid rounds, prices higher than USD 100 a barrel and investors pouring cash into any project are over. Operators have become much more cautious and disciplined when it comes to investing. Long-term profitability and sustainability have become critical aspects for the viability of a project. Mexico should provide continuity to exploration projects as well as those in appraisal and development phases to maintain a balanced portfolio and to sustain production levels.
What advances did Fieldwood Energy make in the Ichalkil and Pokoch fields despite the pandemic?
Making our operations resilient against Covid was a huge challenge for us given the numerous activities we executed during the pandemic. We installed two wellhead platforms, one for each field, and two subsea pipelines that tie these platforms to the Tumut-A, a platform owned by Pemex, that we reconditioned entirely to have a separation and metering point for Area 4.
We drilled two new wells to complete four wells, two at Ichalkil and two at Pokoch. This was not only a challenge due to continuous interruptions in logistics chains and ports, it was also difficult due to the challenges of drilling in deep, high-temperature formations. Fortunately, oil and gas activities were considered an essential industry by SENER, so we were allowed to continue operations during the pandemic, and we successfully adapted them to ensure the health and safety of our employees and contractors despite the multiple challenges of Covid-19.
What production goals and development plans do you have in mind for these assets?
We are determined to be an important asset contributor to Mexico’s oil and gas production. In November 2021, after having invested more than USD 1.2 billion, we started production with our partner PetroBal. Our aim is to reach 30,000 bopd during Q1 of 2022 and 40 mcf [1.13 mcm] per day of natural gas. In addition, we are going to drill two more wells in 2022 and bring them into production.
Our medium-term targets include reaching the ambitious goals of 100,000 bopd and 130 mcf [3.68 mcm] of natural gas per day by 2026. To this end, we plan to start the engineering of Phase 2, which considers additional wellhead platforms, pipelines and other facilities required to increase production. We also need to design the infrastructure to process and separate oil, gas and water. The budget authorised by CNH for 2022 is USD 478 million.
Long-term profitability and sustainability have become critical aspects for the viability of a project. We know that natural gas is playing an increasing role in the global energy spectrum, and this is no different in Mexico. Our objectives when it comes to gas production are clear: 40 mcf per day by the first quarter of 2022 with the aim of hitting 130 mcf per day by 2026. There is a high demand for gas in the southeast of Mexico, which contrasts with the short supply there. So, we definitely think that we will be a significant contributor of natural gas in the future in this country.
When it comes to crude oil, we are producing light oil, which is essential for Mexico. The crude Pemex has been exporting to the global market (Maya oil) has been becoming heavier and heavier. Therefore, mixing heavy oil with a lighter crude, such as ours, allows Pemex to comply with quality targets. The light crude oil we produce will also be important for the local refining market.
What technology are you adopting to make your operations more efficient and sustainable?
As a firm, we are investing heavily in technology to enhance the performance and efficiency of our operations. For instance, the three platforms we designed can be controlled remotely, something that is still uncommon in Mexico.
In addition, we have a strong commitment to sustainability, and we have adopted different technologies that reduce environmental impact during the construction and installation phase of our assets. A clear example is the reel-lay technology we used for the installation of the subsea pipelines. Here, activities such as welding, coating, and testing were carried out on land and then the lines were transported using a lay vessel to reduce the impact on the marine environment during installation. It’s the first time this technology has been used on this side of the Gulf.
Other types of technology we use are also aimed at reducing the overall venting and flaring of natural gas to less than 1%. This figure includes maintenance, bypasses and tests that need to be done. Our goal for normal operations is not to vent any gas into the atmosphere.
What partnerships has Fieldwood Energy forged in order to develop Ichalkil and Pokoch more effectively?
We’ve created an effective and successful partnership with PetroBal. PetroBal brings significant local expertise, and they understand the industry dynamics very well. On our end, we bring new technology and best practices when it comes to drilling, completion and production. This combination of local know-how and technology has made it a win-win for both companies when developing our fields.
We have also built a good relationship with Pemex. We reconfigured their Tumut-A platform, which had no future use for their operations. We entered into a long-term agreement to recondition and operate this platform and now it is fully operational. In addition, the production that we send through Pemex’s facilities helps to improve their reliability and capacity utilisation. This is a clear example of how two or more operators can benefit from working together.