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The partnership of public and private companies will help mitigate risks and share advanced technology as Mexico seeks to exploit its deepwater oil and gas resources.

For many years, the operations of Mexico’s oil and gas industry lived under the cloud of a constitutional monopoly given to PEMEX and its affiliates. However, over the past decade, and especially since the coming to power of President Calderón’s administration, new agreements have been worked out that seek to stay within the limits of the constitution, but at the same time allow the local oil and gas industry to gain improved access to foreign know-how in the sector. With massive amounts of estimated reserves, deep-water exploration and production (E&P) activity in the Gulf of Mexico has become a significant point of interest for local and international companies alike.

With the aim of boosting long-term investments in deep-water blocks, the government has redrawn the policy mix to get private industry companies more active in the E&P stage. Currently, 16 wells have been drilled at depths greater than 500 meters, and most of the discovered resources have been natural gas.

Over the last few years, government investment in the exploration and production of Mexican oil and gas has reached historic highs. In fact, between 2001 and 2012, investments in the national oil company PEMEX increased 5.4 fold. Additionally, an Energy Reform bill in 2008 opened up a variety of opportunities for new contracts to promote services and integrate investments. “Regarding deepwater reserves, the plan foresees an increase in investment of approximately 9% per year over the 2012-2026 period,” Jordy Hernán Herrera Flores, the Secretary of Energy, told TBY. Furthermore, PEMEX and its subsidiary organisms’ business plan for the medium term outlines new and improved strategies and objectives for exploration and exploitation.

The most recent fields being developed include Lakach, which has cost companies and investors approximately $3.20 per thousand cubic feet to establish. Piklis-1 is another potential field in the Gulf of Mexico, with recoverable reserves of around 600 billion cubic feet. Driven by government programs, PEMEX is planning to develop three deepwater wells in 2012. Trion, Supremos, and Maximino will require investments of between $600 million and $800 million, or about $150 million to $200 million per well.

Considering the recent disaster in the Gulf of Mexico, companies such as PEMEX are working harder than ever to ensure that extraction runs smoothly. “We will continue with our deepwater exploration operations, and we will do so in compliance with the regulatory framework in place… we have established measures that will strengthen our procedures and guarantee that the operations will take place in the safest possible way,” Juan José Suárez Coppel, Director General of PEMEX, told TBY. After completing its two most recent projects, PEMEX will advance to the position of second-most important oil company with drilling equipment in the Gulf of Mexico. Many of the company’s wells are located near Perdido, the world’s deepest direct vertical spar. The platform is operated by Shell, with Chevron (37.5%) and BP (27.5%) as the other shareholders. At 2,470 meters, the spar began production on March 31, 2010, and remains the largest drilling apparatus in the region. The presence of private multinationals in the region is an indication of growing private interest in a sector that has typically been dominated by the state.

But PEMEX does not work alone. In fact, private partnerships are playing an increasingly important role in the oil and gas company’s operations, as they help to improve processes and offer unique expertise. For example, Instituto Mexicano del Petróleo has obtained more than 100 samples of water and sediment from deepwater sites in the Gulf of Mexico, with the aim of establishing an updated environmental baseline for the region, and PEMEX in particular. In an interview with TBY, Efrén Parada Arias, Director of Instituto Mexicano del Petróleo, explained that the company “should focus [its] efforts on larger projects that require technological solutions. In this way, we can increase the recoverability of hydrocarbons, reduce waste, clean fuels, and achieve a greater understanding of our country’s resources in order to improve reserves.”

Another company focused on the formation of meaningful partnerships in the oil and gas industry is ExxonMobil, whose joint ventures were designed to support companies as they explore, develop, and produce hydrocarbons in capital-intensive and high-risk projects, of which deepwater exploration and development is a top priority. “Joint ventures allow companies to optimize their portfolio, manage risks, and as a result, new resources are discovered and production levels are maximized. It is very important to note this enables the resource owners to expand their economies and invest more in social problems as a result,” said Jaime Buitrago, President of ExxonMobil Ventures Mexico, regarding the necessity to partner with state-owned oil and gas companies. With exceptionally high risks in the Gulf of Mexico region and some of the most promising oil resources in deep-water areas, Mexico faces many challenges and development complexity. “Companies around the world, including those that are state-owned, partner with others to form joint ventures and share the risk, access technology, and implement the best practices. It is very unusual for a company to choose to go it alone in these types of projects,” Buitrago said.

As PEMEX has historically been behind the curve in adopting innovations and applying cutting edge technology, private companies are stepping up to the plate to provide solutions for the national oil company, seeking to benefit each party and make the best of the vast resources available in the Gulf of Mexico.