Why did Jaguar decide to do a full circle model?
We were able to attain 11 blocks in the 2.2 and 2.3 bidding rounds, which means that the size and scope of Jaguar are not normal for a start-up company. We are talking about over 2,000sqkm, a massive prospect inventory on the exploration side; however, of the 11 blocks we received from the government, five had legacy assets from Pemex that we were able to reactivate and start production. From day one we have been working on the exploration portfolio, though we were already a producer. When we started to look at developments in Mexico's natural gas industry, we realized there was a massive shift of focus and attention being placed on natural gas in Mexico. All we needed to do was be competent and efficient enough to displace imported gas from the US, so it seemed like a great opportunity to look at the whole cycle. We want to provide cost-effective energy and clean energy to Mexico, and the path we need to take to make it scalable to a significant size is exploration. We were always focused on developing the resource to the point of production, and in the last two years, we have learned that Mexican consumers are desperate to buy gas from Mexican suppliers. We realized there are market demand and a fundamental need in Mexico to displace electricity production with bunker fuel.
What steps are you taking become the biggest and most diversified private company in onshore exploration, development, and production in Mexico?
2020 was about becoming a competent operator, and this year is about starting to have a significant impact on the natural gas space. We are proud that our single-biggest achievement during the pandemic is to start drilling operations in March 2020 and operate the entire year with no accidents. One of the things we did this year, which is new in the industry, is implementing remote camps at all our drilling sites to reduce the commute and minimize the rotation of personnel on and off location. We were able to drill six wells successfully during the year and started a second rig at the end of 2020. We have been drilling exploration and delineation wells to date predominately. We plan to pick up a rig to start development activities in the northern part of the Burgos Basin, where we have existing gas resources, and ramp up production significantly over the next 12-24 months. In parallel, we will keep working on the exploration portfolio, which is of a caliber and size that can significantly impact on the total amount of reserves in Mexico. We will have two parallel tracks—one more focused on increasing production today and another generating the reserves we can produce in the coming years. That is the plan for this year.
Why are few companies venturing into the natural gas supply segment?
As a national oil company, Pemex needed to focus its energies on the areas that would be the most profitable in the short term, especially given the pressures it is under financially for the last five to 10 years. It was logical for it to look at large, oil-rich opportunities offshore where the profitability is more of a short-term issue. The lifecycle of a natural gas project is longer, from discovery to commercialization of the gas. There was an abundant supply from the US and existing infrastructure to bring gas into Mexico relatively easily. As a result, it is not a question of whether the gas resources in Mexico were attractive but the prioritization of Pemex. There is another factor here, namely the strategic decision made in the late 1990s in the Burgos Basin—where most of the large gas resources exist in Mexico—to turn over many of the operations to service companies. Unfortunately, that was not as successful in developing cost-effective production as everyone had hoped. There was the mistaken perception in the market that one could not produce gas in Burgos cost-effectively. However, there is a huge amount of opportunity in natural gas. Moving forward, relying on the US as a source of gas given the US market dynamics is a dangerous prospect for Mexico. We are making a significant investment, and there are also other operators making smaller investments. We see a greater willingness to invest in transport and power generation from natural gas in areas where the consumption side of things would be facilitated. The challenge with natural gas is that scale is important, even more so than oil.
In what ways has Jaguar prioritized the social benefit of its projects within its business model?
What is close to the heart of Jaguar and the reason we were established is that we believe we have a small but essential role to play in positively transforming Mexico. We do not measure our success on production metrics but on the number of Mexican families we provide power to. We look at how we can do things to have the best possible impact, whether socially or environmentally. Recently, we worked with the ASEA on the first-ever compensation program that does not need to be co-located with the operations to be much more effective with how we benefit the environment if we can concentrate our efforts into more vulnerable areas. We started monitoring everything we do, whether it is CO2 emissions, water use, or land impact, with the idea that we want to measure Jaguar's total benefit and positive impact based on our four pillars: Social, Environmental, Economic, and Professional Development. The way the industry's talent has worked in the past was appropriate for a massive national oil company. However, it is not for the type of work that smaller independent and even international oil companies will require from Mexico to succeed. Our challenge is to create a competitive staff to make sure the industry moves forward.