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Mexico: $200M investment in oil projects by 2018

Karla Salinas | 24.08.2017

The expected investment and output growth are part of a trend of new Mexican oil companies looking to exploit the energy reforms the country finalized in 2014 to try to reverse years of declining oil and gas production.

Mexican oilfield services provider Cotemar plans to invest at least $200 million in two oil projects by the end of 2018 as it starts to operate fields on its own, a move made possible by sweeping energy reforms, the firm's top executive said in an interview.

Cotemar CEO Alejandro Villarreal said the company expects to grow output to 20,000 barrels per day (bpd) by next year from two onshore blocks discovered by national oil company Pemex but won by Cotemar's upstart oil unit at auction in 2015.

Cotemar's two onshore fields, known as Cuichapa and Paso de Oro, are examples of projects that Pemex could not fully fund due to longstanding budget constraints, and are now set to provide the first significant post-reform streams of new output.

"We worked with Pemex for many years and have a lot of experience in building, maintaining, operating (Pemex's) rigs, but now we're going to do it for ourselves," said Villarreal.

Privately-held Cotemar can develop oil and gas projects on its own after the reforms ended Pemex's decades-long production monopoly.

The company's two blocks are located in eastern Veracruz state. Only the Cuichapa area has production, currently at 1,750 bpd, up from 300 bpd earlier this year and expected to reach 3,000 bpd by the end of December.

Villarreal said Cotemar uses a fraction of the workers at the field that Pemex did and still grew the output nearly sixfold.

"It gives you a clear idea of what happens when the private sector operates (an area)," Villarreal.

The company's Paso de Oro block is seen entering production by September, Villarreal said. It and Cuichapa should be producing 10,000 bpd each by the end of next year.

The executive said the blocks will require investment of at least $100 million a piece by the end of 2018.

Cotemar's oil unit, Servicios de Extraccion Petrolera Lifting de Mexico, is also considering bidding on upcoming joint ventures with Pemex, in auctions set for October.

Villarreal pointed to the onshore Cardenas-Mora and Ogarrio projects, both located in southern Tabasco state, as particularly attractive.

In those tie-ups, Pemex would have a 50 percent stake, while the joint venture partners would hold the remaining half and be operators. 

Source: Reuters