Shell authorized changes to its deepwater exploration plans in Mexico

Mexico City — Shell will be able to accelerate spending on one of its exploratory wells in deepwater Gulf of Mexico to better understand its acreage after the sector regulator approved changes to its 2020 plan.

The National Hydrocarbons Commission on June 11 approved modifications to the "maximum alternative scenario" in Shell´s exploration contract CNH-R02-L04-AP-PG06/2018, which outlines all the activities possible allowed to Shell, the timeline for the activities and the corresponding investment. Shell requested the modifications March 27.

Shell will be able to increase its 2020 spending fivefold from $12.5 million to $74.2 million, the regulator said during an extraordinary session. The 2021 budget will consequently drop by 33% from $186.1 million to $124.9 million, but the total exploration investment for the block through 2023 will not be modified substantially, the regulator said. Shell will also be able to add one more well to its drilling options to maximize chances for success, the regulator said.

"It´s very good news that they are accelerating spending," commissioner Hector Moreira said during the session. "If they are spending this amount in exploration, it means they will be spending billions [of dollars] in the area," Moreira said.

The block, located 155 kilometers (69.3 miles) off the coast of the port city of Tampico, borders another deepwater Shell block to the northeast, and one shallow water block operated by Repsol to the southwest.

"This will be the first well to be drilled in the block and in the area," Rodrigo Hernandez, technical advisor said during the session. "The proposal of the company is to drill one or two wells [...] that will open better options for exploration activity in the area," Hernandez said.

The block, won by Shell during a 2018 oil round, has a total area of 1,890 kilometers and goes from 500 meters-1,700 meters in depth. The proposed well is located in a formation pertaining to the Miocene, Hernandez said. According to geochemical models, Shell is expected to obtain light crude of between API 23 and API 40, Hernandez said. Reserves are calculated at 175 million bce, with a geologic probability of 24%, he said.

Shell did not immediately respond to a request for comment.