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Petroleum History of Mexico: How it Got to Where it is Today*

Alfredo E. Guzmn1

Search and Discovery Article #10530 (2013)**Posted October 21, 2013

*Adapted from oral presentation at AAPG 2013 International Conference & Exhibition, September 8-11, 2013**AAPG2013 Serial rights given by author. For all other rights contact author directly.

1Altamira Petroleum Company, Poza Rica, Veracruz, Mexico ([email protected] )

Abstract

Mexico has five major hydrocarbons-producing provinces: two for oil, the Southeast and the TampicoMisantla basins; and three for gas, the

Sabinas, Burgos, and Veracruz basins. It has seven other provinces with potential: California, Gulf of Cortes, Chihuahua, Sierra Madre Or iental,Sierra de Chiapas, Progreso Shelf, and the Deep Gulf of Mexico. Nevertheless, despite this natural-rich endowment, Mexico is the only country

in the world among those considered to be oil-rich that has consistently lost production and reserves in the last ten years.

Many reasons can be attributed for these results, and as this article proves, the least of them is the country`s endowment of oil and gasresources. The explanation can be found in the petroleum history of Mexico. Since 1938 the country has had only one oil company responsible

for all of its upstream activities. Even though Pemex`s performance is comparable with that of most of the majors, it is impossible that all theremnant potential of the whole country can be found and produced through only one company, no matter how large, wealthy, efficient,

technologically advanced, and successful it can be.

The understanding of the petroleum history of Mexico helps explain why the country is so unexplored and undeveloped. Significant historicalaspects/features/events have been:

the legal frame, that up to now has precluded third party-participation outside of Pemex`s in the exploration activities of Mexico;

the discovery of the supergiant onshore Mesozoic ChiapasTabasco and offshore Gulf of Campeche provinces in the 1970`s, that tookPemex to concentrate all its resources in the development of the Southeast basin;

the historically allocated Capex for E&P, that has been totally insufficient to allow a systematic exploration and development of the

country`s potential; and

the exploration activities that have focused mostly in low-risk, extension opportunities with little expenditures allocated to test rankwildcat ones.
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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The results of these policies are complete basins / provinces / plays with tremendous potential untested for all practical reasons. The history, as

it is being written today, allows for optimism as the country is being opened-up for third-party participation in the upstream, which will allowfor spectacular results.


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The Petroleum History ofMxico

How it Got to Where it is Today

Cartagena de Indias, ColombiaSept. 2013

Alfredo E. Guzmn


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The Petroleum History of Mxico

Some background

Evolution of the E&P sector Today and the future

Closing remarks


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Some background: Mxico`s oil and gas basins

Burgos

SierraMadreOriental

Sabinas

Chihuahua

Gulf of

Corts

California

Basins

Sierra deChiapas

Veracruz

Chicontepec YucatanShelf

Sureste

Macuspana

6 producing basins 6 with potential. No oil or gas yet

produced from the

deep GoMGas Oil

DeepGoM

Tampico

Misantla


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OIL

(bb)

GAS

(tcf)

Discovered

(OIP)

263.32 100% 279.47 100%

Produced 40.62 15.42% 71.59 25.61%

Reserves(3P)

30.82 11.70% 63.23 22.62%

Remnant 191.88 72.87% 144.65 51.77%

Source: National Hydrocarbon Commission

Oil and Gas historically discovered in Mxico


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Evolution of the Petroleum Industry in Mexico

Poza Rica1930

Chiapas Tabasco 1974

OffshoreCampeche 1976

North Golden Lane 1908bano Pnuco 1904

What next, Deep Water?

1940`s , 50s & 60`s

K & J fields

Tertiaryfields

The Syndrome of the Bitten Apple A. Lajous


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First Commercial Oil, April 1904

BOD

bano Pnuco Province, Tampico Basin

Production

History


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Mid K

Tert iary

BasementJr

UK

LK

0 10 20

1

seg

km

Northern Golden Lane, 1908

San Diego

de la Mar-3 At the time

this model

was notunderstood

Northern

Golden

Lane

prodn.

banoPanuco

production

Pozo Cerro Azul 4260 MBOD


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Pozo Ao BOD

Cerro Azul-4 1916 260,000

Potrero del

Llano-4

1910 115,000

San Diego

de la Mar-3

1908 80,000

Juan

Casiano-7

1910 72,000

lamo-2 1920 45,000

Juan Casiano - 7 Cerro Azul No. 4,

San Diego de la Mar- 3 (Dos Bocas)

2 KM

The San Diego de la Mar N3 well blew upand flowed through two branches creating

a crater half a km in diameter

Northern Golden Lane, 1908

P Ri Fi ld 1930


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Poza Rica Field, 1930

0

25

50

75

100

125

150

175

200

35 40 45 50 55 60 65 70 75 80 85 90 95 '00

Production history

One of the largest stratigraphic traps in the world in carbonate rocks

Poza Rica-2

discoverywell

Mxicos productiondepended on the Poza

Rica field for 30 years

Source Pemex


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The 1950 through the 1970s

Js. Arenque

Js. Tamaulipas

Js. San AndrsK. Faja de Oro North

K. Faja de Oro South

Ogarrio

Cinco Presidentes

Snchez Magallanes

Important fields were discovered in the Upper Jurasic and Middle Cretaceous

of the Tampico - Misantla Basin and the Tertiary of the Sureste Basin

UJ sedimentario Model

UK sedimentario model

Source Pemex

Th M i i th S t B i 19 0


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Cinco Presidentes

Cactus-Sitio Grande

Chac

The Mesozoic in the Sureste Basin, 1970s

Mesozoic oil

Tertiary oil

Tertiary gas

Source Pemex

In 1972 the Mesozoic carbonates underlying the Tertiary siliciclastics were

reached discovering the giant accumulations of the Chiapas -Tabasco province

and in 1976 the mega-offshore Campeche province was proven successfully.


14/27Source: National Hydrocarbon Commission

What the discoveries in the Mesozoic meant

Reserves increased more than 65 BBO and production

more than 2 MMBOD in less than 10 years.

BBOE 72.5

MBOD


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0

20

40

60

80

100

120

140

160

180

1938

1940

1942

1944

1946

1948

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

4844 exploratory wells 1938 - 2009


The exploratory drilling reflects the investment


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18,030 wells 1960 - 2008

24,365 total1,627 producers

Source:. Dr. G. Dominguez, PEMEX publications

Development wells drilled 1960 - 2010There was also a drop in the activity in part due to the high productivity of the

Mesozoic wells


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The History After the Big Discoveries

4.79 6.33

72.5

43.5

16.0

45.8

BBOE


0

500

1000

1500

2000

2500

3000

3500

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005

Chiapas-Tabasco

OffshoreCampeche

N2 injectionMBOD

2010

Cantarelldecline


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What is next

The future is dependent on the approval of a proposed

Energy Reform Bill by the Mexican Congress.

Mxicos strategy is based on:

Deep water exploration (and development) Chicontepec development Unconventionals (Shale gas and (tight) oil) Optimization of mature fields

Exploration of traditional areas

Deep Waters


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0 100 200 300

kilmetros

Poza Rica

Veracruz

Reynosa

1

Cd. Carmen

CinturnSubsalino

Provincia

Salina del

Golfo

Cordilleras

Mexicanas

CinturnPlegado

Catemaco

CinturnPlegado

Perdido

Deep Waters

Half a million km, Pemex calculates a potential of 30 BBOE

Source: Pemex

Tampico


20/27Source: Pemex

Trion 1, best discovery in Mexican side of the the deep GoM

The Perdido Fold Belt


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Unconventionals, Shale gas and oil

Main plays:

The Eagle Ford,

continues extensively inMxico with same

characteristics it has in

South Texas

The Paleozoic ofNorthern Mxico

The Upper Jurassic ofthe Gulf Coast

The EIA considers the potential for shale gas in Mxico to be

545 TCF and the shale oil to be in the order of 13 BBO

OIL

WET

GAS

DRY

GAS

Source Pemex


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Source Pemexreef

Thrust belt

3P Reserves: 10,715 MMB (13%)27,636 MMMCF (70%)

Cum

production: 230 MMBO (0.2%)

424 BCF (1.0%)

OOIP: 81,492 MMB

OGIP: 39,756 MMMCF

Chicontepec Paleocanyon

It holds 38% of all the reserves of Mxico. Its development

requires unconventional technologies as it is mostly tight oil

Th Hi t f D G


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The History of Dry GasThe Dry Gas Basins that have been discovered in Mxico are:

Burgos (1945) and Sabinas (1976) basins

Veracruz Basin, 1953

0

20 0

40 0

60 0

80 0

100 0

120 0

140 0

160 0

19 4 5 5 0 5 5 6 0 6 5 19 7 0 7 5 8 0 8 5 19 9 0 9 5 2 0 0 0 0 5

1,400MMcfd

0

100

200

300

400

500

600

700

800

900

1000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

0

20

40

60

80

100

120

140

160

180

77 82 87 92 97 '02

Sabinas

contribution

1,000

MMcfd

Source Pemex

Th Hi t f D G


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5960616263646566676869707172737475767778798081828384858687888990919293949596979899

400

600

800

0

200

400

600

800

580

200

The History of Dry Gas

The two other Dry Gas Basins are:

Offshore Veracruz Basin, Lankahuasa field, 2002

Macuspana, Sureste Basin, 1905

Source Pemex

Th F t


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3,000MBOD

The Future

Pemex expects to bring production to 3 MMBOD, but the output will

depend on the legal reform presented to Congress.

Source Pemex


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Closing Remarks

Mexico has a very rich history regarding the search andextraction of its oil and gas.

The volumes produced compared to those found arenot what they should be.

This is in part the result of what has been called the

Bitten Apple

syndrome. But also because insufficient participation of third

parties which has limited the countrys potential.

There is a huge number of opportunities for the E&P for

oil and gas.

For these to be made real, a legal reform was presentedto the Mexican Congress.

Mxico has enough oil and gas to write another 100years of history.


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Thank you!

Ndx Guzman

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