Mexico’s top oil & gas projects under development: Coming to grips with main hydrocarbon challenges and obstacles at home and abroad

Many factors, including roadblocks, play a role in oil and gas extraction and development around the globe. Some of these are region-specific while others tend to be a global problem. Mexico’s five largest upcoming hydrocarbon projects have not managed to escape these, thus, they are also facing such technical and other issues. The Latin American country’s energy officials have offered a glimpse into the prospects for the exploration and extraction of hydrocarbons not only in the domestic playground but also the international one against the backdrop of economic, geopolitical, and energy transition woes and opportunities.

The Comisión Nacional de Hidrocarburos (CNH) or National Hydrocarbons Commission, which is responsible for regulating Mexico’s hydrocarbons sector, recently provided an overview of technical challenges in strategic projects of hydrocarbon extraction within Mexico’s oil and gas ecosystem.

According to Rafael Guerrero Altamirano, CNH’s Head of the Extraction Unit and its Supervision, the list of key current oil projects consists of Woodside Energy-operated Trion, Pemex-operated Quesqui, Ixachi, Zama, and Lakach, for which Pemex agreed to hand over the reins to Grupo Carso, owned by Carlos Slim, one of Mexico’s billionaire.

Regarding the technical challenges related to the Trion development, run by Pemex and Woodside Energy, Guerrero Altamirano points out that the project lies in a water level of 2,600 meters (m) with a total depth of 4,400 m to the deposits.

As a result, Trion requires subsea infrastructure, together with a floating production unit (FPU), for the management and assurance of flow, the use of storage and unloading vessel (FSO) being built by SBM Offshore; the use of double displacement technique (gas-water injection); and a 140 km 16″ collection pipeline to connect with the South Texas-Tuxpan gas pipeline in Mexico.

Based on the current plan for the project, 12 producing wells are expected to be drilled, out of which 10 will be water injectors and 2 gas injector wells. While the peak production capacity is expected to be 110 thousand barrels per day (kbpd) by 2028, the figures for gas are anticipated to be 124 million cubic feet per day (MMcfd) by 2035.

Trion is seen as the first development plan for ultra-deepwater extraction, approved in August 2023, derived from Pemex’s association with Woodside. The total project cost is estimated at $10.43 billion – made up of $7.015 billion in investment and $3.42 billion in operating expenses. The development plan considers recovering, at the end of the term of the contract, in 2052, a volume of 434 million barrels of oil equivalent (MMboe) and 219 MMcf of gas.

CNH’s Head of the Extraction Unit and its Supervision explains that the Quesqui project’s requirements are secondary recovery utilizing water injection for pressure maintenance; high complexity in drilling and information collection (geopressured reservoir), and conserving the reservoir pressure above the saturation pressure to conserve 41% of the retrograde liquid volume.

With 168 kbpd of condensate and 588 MMcfd of gas, Quesqui has 13 producing wells and is intended to drill eight additional wells and 10 water injection wells. The Quesqui field, perceived to be one of the strategic assets of the current administration, remains the main producer of natural gas, with 585 million cubic feet (MMcf) of gas last April, based on Guerrero Altamirano’s view.

The next project on the list, Ixachi, is perceived to be highly complex in drilling and information collection. With the current condensate level of 61 kbpd and 507 MMcfd, the development is expected to reach its peak production of 147,000 barrels of condensate by 2028 and 1,035 MMcfd gas by 2031. The project has four exploratory wells, one delimiter, and ten development wells, however, 65 additional wells are planned to be drilled.

Ixachi is said to be another of the strategic fields of this administration, as it ranks second in production with 505 MMpc of gas, which was reported last April. The Quesqui and Ixachi onshore fields added gas production of 1,090 MMcfd in April, representing 28% of the total gas produced that month.

On the other hand, the Zama shallow water development project – being developed by Pemex, Talos Energy, Wintershall Dea, and Harbour Energy – is perceived to show a high complexity for transport and flow assurance, with a recovery system that employs water injection.

This project, deemed to entail high complexity in drilling and finishing with 190 m water ties – comes with peak production of 180 kbpd and 70 MMcfd by 2031. With two Octapode-type platforms, the development is intended to cover drilling 29 development wells and 17 water injectors.

The development plan for extraction anticipates the start-up of Zama in December 2025. The operator’s development plan for the unified area considers recovering, at the economic limit of the contract up to September 2051, a volume of 625.68 million boe and 243.29 MMcf of gas, with an estimated recovery factor of 37.8% for oil and gas.

The last project on the list is related to the Lakach field, for which CNH’s Head of the Extraction Unit and its Supervision underscored the importance of a subsea production system and infrastructure with a water level between 900 and 1,200 m. There is also the need to find a balance between the extraction strategy and the volatility of the gas prices to make the project profitable.

When it comes to Lakach’s challenges, Guerrero Altamirano emphasized the marketing part and the project’s peak gas production of 300 MMcfd by 2025. This development has an exploration well, a delimiter, and 6 development wells.

The Commissioner of the CNH, Dr. Salvador Ortuño Arzate, recently gave an overview of the prospects for the exploration and extraction of hydrocarbons in Mexico and around the globe bearing in mind the current context of the international market in the oil industry and its transition on a global scale.

Within this overview, Dr. Ortuño Arzate presented a general analysis of the history of production, consumption, and supply of hydrocarbons on an international scale, which allowed a glimpse of the future expectations regarding the supply and demand of oil and gas, based on a scenario that considers the most significant geopolitical and economic variables in recent years.

While discussing the international petroleum arena, the Commissioner noted that the figures at the end of 2020 indicated total proven oil reserves of 1,732 billion barrels, distributed in the different geographical regions of the world, with the Middle East holding about 50% of such reserves. 

The picture for gas is not that much different when it comes to the place where most reserves are concentrated, as it was determined that proven gas reserves total 188.07 billion cubic meters (bcm), with the Middle East having about 40% of this resource, followed by Russia and other countries that made up the former Soviet Union (30%).

Moreover, Dr. Ortuño Arzate’s oil extraction figures indicate a total of up to 89.88 million barrels of oil per day (MMb/d) worldwide at the end of 2021, of which extraction levels based on geographical regions indicate that the Middle East with 31% was still at the top, followed by North, South and Central America at 27% and 7%, respectively, and the Former Soviet Union (Russia) with 15%.

These regions extract 80% of the world’s oil while the remaining 20% is distributed among Africa and Asia-Pacific each holding 8%, respectively, and Europe with the remaining 4%. The total volume of gas extraction was 3,861.52 billion cubic meters and the main producing geographical regions were North America (28%); Former Soviet Union (Russia) (22%); the Middle East (18%), and Africa (17%).

These regions extract 85% of the world’s gas, with the remaining 15% distributed among Asia-Pacific (6%), Europe (5%), and South and Central America (4%). Thanks to the energy transition to low-carbon and clean sources of supply, the demand for gas and liquified natural gas (LNG) is expected to grow in the coming years as countries intensify their efforts to move away from coal.

Furthermore, Dr. Ortuño Arzate’s oil consumption outlook up to 2040 pinpoints various discourses concerning the energy transition while elaborating on the new vectors of clean energy in each geographical region. While BP’s projections for 2023 noted that world oil production would go from 95.50 MMb/d to 66.50 MMb/d in 2040, the International Energy Agency (IEA) estimated that oil production would grow from 81.82 MMb/d to 85.38 MMb/d in the same period.

The use of unconventional resources and their exploitation in the future was expected to be on the rise with both forecasts for oil production in unconventional fields anticipating a jump to 10.35 MMb/d in 2040 from 4.99 MMb/d in 2015. The figures for gas in the same type of fields globally indicated an uptick in production from 34.6 trillion cubic feet (Tcf) in 2022 to 63.6 Tcf by 2040.

Mexico’s total conventional and unconventional prospective resources are estimated at approximately 68 MMMb of oil, consisting of 53% in unconventional fields and 47% in conventional ones. The prospective gas resources are around 225 billion cf with 63% contained in conventional fields and 37% in unconventional ones. The prospective resources in crude oil equivalent are estimated at 113 million boe.

Dr. Ortuño Arzate’s analysis emphasized the need to rethink new strategies regarding the value chain of hydrocarbon exploration and extraction, given that the demand for fossil resources at a global level is set to increase in the coming decades while the alternative energy vectors are consolidated and implemented in the short and medium term towards the search for an energy transition that benefits the nation.

Therefore, CNH’s Commissioner is convinced that Mexico requires several strategies and actions, including:

• Oil and energy planning: This entails confluent variables, a decline of reserves, new energy vectors, and environmental conservation, versus the challenges of growth and economic and social development of the country stemming from oil income and fiscal regime.
• Energy availability and security: The segment covers the situation or status of possession of natural resources alongside research, and development infrastructure in an integral value chain and well-sustained economic base.
• Energy security, autonomy, and sovereignty: The trio is perceived to be the basis of national security in the face of the challenges facing the current globalizing world.
• National security: In this segment, the vast majority of the sectors and social classes are expected to have their vital cultural and material needs guaranteed through the decisions and actions of all the institutions.

While all of these strategies and actions still promote the use of fossil fuels, primarily oil, gas, and LNG, with the last two being the main contenders as transitional fuels, the gradual shift to renewables and other clean energy sources is also being recommended and actively pursued around the world, albeit to a different extent depending on the region.

During the low-carbon and green energy quest, electrification of existing onshore and offshore fossil energy infrastructure and the greater zest for grid upgrades and subsea interconnectors are anticipated to aid the energy transition efforts toward reaching the global net zero aspirations.