TBY talks to Javier Zambrano, CEO of Jaguar Exploration and Production (E&P), on lessons learned at auctions, innovation, and refining capacity in Mexico.

 Javier Zambrano
Javier Zambrano joined Topaz in 2014 and was responsible for Topaz's energy division. During this time, he assembled a team of Mexican geoscientists and engineers to actively pursue and operate oil and gas opportunities in Mexico. These activities were later incorporated under Jaguar E&P, where he was appointed CEO in 2017. Zambrano graduated with a BS in mechanical engineering from ITESM Monterrey and holds an MBA from The Wharton School, University of Pennsylvania.

What were the reasons behind the company's recent success in the second round of public auctions conducted by the National Hydrocarbon Commission (NHC)?

Jaguar E&P, since its incorporation, has had a clear vision: to become one of the leading E&P companies in Mexico. We are focused on mature, onshore fields. There is a huge opportunity due to Mexico's circumstances, particularly related to Pemex's financial constraints, which have left many fields under-developed. Jaguar was awarded several fields in the Burgos Basin and in Veracruz and Tabasco states. We have opened regional offices in these areas to operate the businesses with the support of local service companies

Why did Jaguar decide to focus on mature, onshore fields?

From the outset, we were sure we wanted to become operators. This immediately ruled out the more expensive shallow and deep-water projects; targeting onshore mature fields made sense because there is less capital and less uncertainty involved. These mature fields typically have existing seismic studies, well logs, and geological information that allow companies to make better estimates of resources and production curves. Second, the investments required are less capital intensive. Starting with fields with more information and easier access was the obvious route for us to become operators

What lessons have you learned from the auctions so far, and how will you adjust your strategy for future public bids?

We now have a solid and diversified platform. We have achieved diversification in three senses, the first of which is regional. Second, we have both oil and gas within our portfolio, and lastly, we have diversification in terms of the maturity of the fields. Some of our fields are already producing, while others are in the exploration phase. We are in an extremely comfortable position from where we can grow. The information from the data pack and NHC has significant gaps. The more a company can learn about the geology of a field and how to operate on it, the better it can make evaluations and bids. Information is key to this business. In the following rounds, we will have a more concise approach to assess the potential of each field

What are the pillars of your innovation strategy?

Most of the fields we were awarded have never been developed with the proper use of technology. For example, the seismic data for some of the blocks is fairly old, and we can use new technology to upgrade and reprocess this, which will lower the exploration risk. There are also new completion techniques we can use in these fields to optimize flow and production. We can use lateral drilling to control the water in some of the reservoirs we have. There is a great deal we can do with these old fields, even with the basic technology that is out there

Should Mexico invest in constructing new oil refineries and upgrading the existing ones or are there other priorities at the moment?

Refineries could be a strategic part of Mexico's economy, and a country needs some control over refined products. However, the best economic solution is probably not new state-built and run refineries. There must be an economic equation that allows private investors to re-build and efficiently operate refineries. Another option is the idea of buying refineries, or refining capacity, in the US where there is access to better infrastructure. It is always a balancing act for countries between supply, cost, and energy security issues. It is the same issue with gas. Currently, Mexico imports around 80% of gas consumed nationally, which is not ideal.