by George Baker, Principal ENERGIA.COM
Introduction
The logic of partnerships in deepwater ventures responds to the interests not only of the oil
companies but also to those of society: all parties want new oil supplies and optimized valuegeneration.
In Mexico’s case, Pemex (Petróleos Mexicanos) has told the government that it
cannot develop the deepwater areas of the Gulf of Mexico alone. The current energy debate
hinges largely on this one statement. A new window into the debate in Mexico is offered by the
experience of international oil companies (IOCs), for which such associations are routine. Decisions
are guided by considerations of portfolio management, project optimization, and resource
utilization. We examine the implications for Pemex and for Mexico of commonly held views
outside of Mexico of the importance of jointly ventured deepwater development projects. In the
section of observations in the first chapter, we take note of the Senate testimony in June 2008,
much of which focused on deepwater topics and policy in a broader discussion of reserves,
exploration, and production. In the following section of conclusions we apply what we have
learned to the Mexican case.
Principal upstream arguments of the Mexican government
The Mexican government has presented, as facts, four general arguments about the present
situation of Pemex in relation to the outlook for oil production:
1) Production from known onshore and offshore areas is in serious decline, a trend that
cannot be reversed by the discovery of new, small fields; and, currently, proved reserves
exist for less than 10 years.
2) The only known area in Mexican territory where there is a potential for new oil production
on a large scale—upwards of 1 million b/d—is in the deepwater areas of the Gulf of
Mexico, where there may be giant fields with high production rates. Pemex estimates
that in this region there are fields containing 30 billion barrels of oil equivalent (BOE)
that have yet to be found and appraised as commercial discoveries.
3) There is an urgency to begin a serious commitment to deepwater development, given
that the lead time is 8-12 years, the period needed to complete the full cycle of exploration,
appraisal, and production. In this timeframe, a decline in oil production of 1 million
b/d at 2008 prices of $100/bbl would mean an annual loss of revenue to the government
in the order of US $36 billion.
4) Pemex cannot be expected—even in the best of circumstances—to undertake this
challenge alone.
Each of these arguments is undergoing sharp debate in Mexico, and the Senate has heard
testimony from persons who question each argument.
Scope of report
This report mainly addresses the fourth argument, not primarily from the point of view presented
by the government, but from a broader perspective of the best practices of IOCs. The
report examines the special topic of partnerships in deepwater ventures. The goal is to present
the general considerations—avoiding legal or contractual fine points—that lead oil companies to
form partnerships in deepwater ventures.
Download the Table of Contents and Introduction
Single Copy - $3,000
Multiple Copies - $2,400
For more information please contact PennEnergyResearch.
For more Offshore research please click here.
