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Mexico eyes extra-heavy crude for quick win

06 Mar 2018 16:34 GMT
Mexico eyes extra-heavy crude for quick win

Houston, 6 March (Argus) — Mexico's vision of the future of exploration and production in Latin America includes a throwback — developing extra-heavy crude oil reserves to feed US Gulf coast refineries calibrated for that grade.

While the country recently launched a tender for unconventional onshore reserves along its northern border, the country's national hydrocarbon agency director Juan Carlos Zepeda said today that the country sees its 3.1bn bl of 3P extra-heavy oil reserves as a "short-term investment opportunity."

"The margin between WTI and heavy Canadian crude is at its narrowest in several years," Zepeda said at the CERAWeek conference in Houston today. "The Gulf coast refineries were designed to process heavy oil from Mexico and Venezuela, where its production has been in decline. Heavy oil in the Gulf of Mexico is going to be in high demand."

Zepeda said about half of these reserves are in the Ayatzil field, for which state-run Pemex holds the rights. Investment there would depend on additional farm-out agreements.

The other half are clustered nearby in what could be offered in another round to auction exploration and production (E&P) rights, Zepeda said.

Mexico is in the midst of a series of staggered bidding rounds to offer E&P rights in its upstream sector as part of its sweeping energy reform enacted in 2014. Mexico has already awarded 91 contracts in 12 bidding rounds, with an average take for Mexico's government of 70pc, Zepeda said.

Earlier this week Mexico released details of its first ever auction for rights in shale formations in its northern region, seen as extensions of prolific basins across the border in Texas.