Mexico’s strong bet on exploration

Mexico

Luis H. Ferrán, managing director of The Mudlogging Company, talks to The Energy Year about the company’s plan to enter the US market, the importance of technology and data in its field, and the business relationship it holds with Pemex. With over three decades of experience, The Mudlogging Company provides analytical drilling products and services in the oil and gas sector.

What importance will exploration be given in the coming years, and how can service firms provide these services to IOCs?
In 2022 and 2023, the exploration scene will be fundamental in Mexico, especially in the Campeche and Tabasco sites where along with shallow-water plays, we also have had recent onshore discoveries such as Ixachi and Valeriana, led by Pemex. Regarding private operators, companies such as Eni and Hokchi Energy are at the forefront, having already designed a development plan in their fields and rolled out tenders. Repsol also made an important discovery in Block 29 in intermediate waters.
To work for these IOCs, service suppliers have to go through a third party. All international firms tend to contract services through an integrator, such as Schlumberger, Baker Hughes, Halliburton or Weatherford. These companies subcontract to local service firms because field development onshore and offshore requires many types of specialities.
This is why our work for private operators is channelled through them. A tender launched by a private firm requires comprehensive work, and we can handle a part of it. We are very specialised and focused on what we do, and the industry, from private operators to Pemex, knows this well.
The fact that there will be a strong bet on exploration work in the coming years opens a window of opportunity for us. There is a need to increase the reserves-to-production ratio in Mexico, where Pemex, for example, has focused on recovering more of its reserves. This is the basis for the further development of its fields, especially in shallow waters, to eventually reach 1.8 million bopd by 2024 and enhance its depleted reserves.

To what level has Pemex upgraded its standards and how has collaboration with Mexico’s NOC increased?
Over the years, Pemex has progressively raised its standard when it comes to requesting international certifications. This is witnessed especially in the offshore scene, where we find high requirements in terms of NOV certifications, and NFPA [National Fire Protection Association] safety certifications.
This is not to mention the different ISO certifications that are already in Pemex’s application programme and portfolio. A private company operating in Mexico today has exactly the same standard as the NOC, meaning that there are no real differences in terms of standards when the NOC wants to work with one or another. In this scenario, any service company has to implement the needed changes and quality to reach those standards.
The government needs service suppliers more than ever, and that’s why the relationship between Pemex and oilfield service suppliers has improved substantially. A sense of collaboration has been reinforced in the market, and this is needed to achieve the ambitious targets that have been set.

What capabilities does The Mudlogging Company have in terms of terrain type and nature?
We have been in the market for more than 20 years, with the capabilities of working onshore and offshore, in both shallow and deep water. We started our work in Reynosa, Burgos Basin, dealing with gas, which means that we know the gas-based terrain in the Burgos Basin very well. After that, we migrated to the Veracruz basins, mainly Poza Rica and the “Golden Belt,” including Lankahuasa, Playuela, etc. Pemex was developing some wells in that region, and we were contracted to carry out work there due to our expertise.
Interestingly enough, when Pemex started to work in the deepwater, in the fields bordering the USA, we were chosen to service them on a portfolio of around 12 wells. However, over the last year, Pemex has decided to partially walk away from deepwater operations as they are more expensive and long-term wells. Yet, we still see the international private operators such as BHP Billiton developing deepwater plays such as Trion, where the Grupo R platforms are.
We worked continuously on two rigs from 2014 to 2016 in 14-16 wells that reached 3,500 metres of depth in fields adjacent to Trion. For this type of work, we had to upgrade our technology to double-gradient, which refers to the temperature change between water and land. So, all together, we have experience in deep and shallow water, as well as in oil and gas basins.

What public and private clientele and contracts have you managed to secure lately?
Currently, around 90% of our projects are being carried out with our main client, Pemex. We have secured two annual large global contracts with them under a system called ACREF. The first contract with Pemex is a marine one, based in Ciudad del Carmen. This year, Pemex has contracted six to eight cabins where we will offer services such as pressure and temperature measurement, cuttings classification, prevention of blowouts and pore pressure detection in real time.
The second contract is geared towards onshore assets in the Tabasco region and southern Veracruz. Our base is in Villahermosa, covering all onshore exploration fields and development wells. When it comes to working for private contractors, we have strong ties with Weatherford and Baker Hughes. We also have an agreement with Schlumberger for delivering personnel services. In the past three years, we have also worked directly with Perenco and other small operators.

How important is technology transfer and what inroads are you making in geochemistry?
The service that we provide is basically a commodity and as such, you have access to a lot of technology in many parts of the world. In the years when the Mexican peso lost ground, we decided to incorporate our own technology, especially in manufacturing.
We have a manufacturing workshop in Villahermosa, and we only import what is absolutely necessary. We have everything on hand to be able to manufacture locally. However, there are certain business niches that are emerging, and we are going to the US to bring new technologies. It is in this context that we are looking very closely at the area of geochemistry.
Geochemistry is an extension of our business. However, it can determine practically in real time, not only the presence of oil and gas, but also the type of hydrocarbon that may be present. It is more specialised and therefore requires better instruments. We are already working on this area to be able to develop an investment plan. This means we are looking at what technologies are out there and which could be implemented in our workshops. Our aim is to import technologies that enhance our efficiency and value to the company.

How are you engaging with data management as part of oilfield services?
The area of data management has turned out to be crucial in what we do. In previous years, we have made sure to create strong alliances with developers, especially in Latin America. What we do, on the field, is to organise all the data, which is transmitted in real time and sent to a monitoring centre. Although it belongs to and is operated by the NOC, the assigned personnel to work there are those of The Mudlogging Company as well as those of other different entities. Now, we are present in the Ciudad del Carmen data room, with several technicians for real-time data analysis.

What interest does  The Mudlogging Company have in entering the US market?
In 2022, we have decided to focus on the oil and gas potential in Texas. The idea is mainly to understand the intricacies of the American basins and then start approaching operators directly without the need for third-party players to offer the best of our services. The price of oil remains high, which means that there will be an increase in activities and thus, a continuous need for the services we offer. There are plenty of opportunities in Texas.
We are now looking for the right people to join us, with the required experience and know-how. This new approach is also a way to target international companies working in the Gulf of Mexico, both on the US and Mexican sides, as well as local companies working in Texas. We want to have one foot in Mexico and the other in the US.

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