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Oil & Gas Mexico UKTI Mexico / Subsea UK lunch & learn, Westhill 18/12/13 John Tominey, Senior Trade & Investment Officer - Oil & Gas john.tominey@fco.gov.uk

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• Overview of the current issues affecting

Mexico

• Developments in Deepwater

• Contracting in Mexico

• Energy Reform

Oil & Gas Mexico

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Problems Facing PEMEX

• 2004 - Cantarell reaches peak production Dropping from > 2,125 b/d(2004) to ≈ 380 b/d (today)

• Overall production has fallen from 3.383M b/d to ≈ 2.550M b/d

• Mexico is facing an energy crisis!

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• 2008 Reform introduced Integrated Services

Contracts

• Development of Chicontepec

• Investment in offshore E&P

Strategy to Increase Production

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Deepwater Projects in Mexico

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Southern Deepwater fields

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Lakach Project

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Lakach Project – technical challenges

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• Mexico must increase investment in fields that will require a large amount of deepwater expertise

• Perdido alone contains around 13 billion barrels

• 50% of reserves are in deepwater

• To be successful in hitting their targets PEMEX needs to collaborate

• There are already around 25 British companies working successfully in Mexico’s oil and gas industry

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Deepwater - Main Points

Contract Regimes

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• Multiple Service Contracts

• Integrated Service Contracts

– Negotiated on an individual basis

– Likelihood of repeat business

• Contracts Post 2013 Reform?

– Likely to focus on operators that can bring significant increase in E&P investment

Contract Regimes

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• Remuneration is based on individual project characteristics

• Allow for incentives / bonuses

• Each contract takes into account; performance indicators, duration, payment and adjustment mechanisms

• Duration can be for between 20 – 30 years

Focus on Integrated Service Contracts

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• PEMEX describes their ISCs as having 3 stages

• 2 year initial phase

– Application of technology solutions

– Seismic Shooting

– Processing and evaluation

– Exploration drilling

Focus on Integrated Service Contracts

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• 3-7 year infrastructure phase

• 10 – 15 year Production phase Petrofac and Schlumberger amongst

Others are doing very well from these

types of contracts

Focus on Integrated Service Contracts

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• Petrofac

– Arenque (offshore field)

– Lakach (deepwater drilling and consulting)

– Panuco (onshore)

– Magallanes and Santuario

• Schlumberger – Panuco

– Carrizo

– Business Consulting

• Weatherford – Drilling

– Well construction

– Completion

– Stimulation and chemicals, etc...

Prime Contractors in Mexico • Subsea 7

• Engineering, fabrication and installation of a 16 km pipe, two slug catchers and two cantilever structures for the Line 60 project in the Bay of Campeche.

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• Grupo Diavaz – Very active in the Subsea sector

– Construction, inspection and maintenance

– Studies and analysis

– Commercialisation and distribution

• Grupo R – Installation of offshore platforms

– Deepwater drilling

• ICA Fluor – Fabrication of offshore installations

– Fabrication of drilling rigs

• Grupo Protexa – Construction of underwater piping

– Installation and maintenance

Mexican Prime Contractors

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• There are large internationals already operating in Mexico

• PEMEX depends on consulting and services provided by service companies

• The ISCs provide manoeuvrability for assignees to subcontract as they see fit

• The supply chain is under-developed and early market penetration will be rewarded

• The Majors are expected any day now

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Main Points about contracting in Mexico

How will the Energy Reform change the Industry in

Mexico?

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• A wider array of contract models including concessions

• Strengthening of the regulator (CNH)

• Creation of a petroleum fund

• The removal of the unions from the board of PEMEX

• Opening of the downstream sector to private investment

• 90 days for PEMEX to report on current E&P portfolio

• 120 days for the Senate to create NC regulations

• PEMEX and the CFE have 2 years to go from “State-owned companies” to “Independent companies with State participation”

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Secondary Legislation will address

• HSE criteria

• Timing and structure of contracts

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The biggest change in 75 years!!

Mexico is open for business!!

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Thank you & Merry Christmas John Tominey john.tominey@fco.gov.uk

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