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Shell to explore all options to find oil in the Mexican ultra deepwater Gulf of Mexico

Highlights

Shell's investment to increase to $345.8 million

Company looking for up to 562 million boe

Mexican contractor Grupo R to provide platform

Mexico City — Shell will conduct all the activities allowed in the exploration plan for one of its blocks in the ultra deepwater Gulf of Mexico as it seeks to fully understand its potential.

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The National Hydrocarbons Commission (CNH) on Aug. 28 unanimously approved Shell's request to carry out all the permitted activities in the exploration plan for its Xochicalco-1EXP, a field located 123 miles off the coast of the city of Tampico, in the Northern state of Tamaulipas, which include drilling one additional well and a sidetrack.

Shell will drill the second well at depths of five miles trying to reach a Wilcox formation, with prospective reserves of as much as 562 million barrels of oil equivalent, said Israel Hernandez Perez, technical advisor, during a webcast session on Aug. 28. Shell requested "these" activities in June, Hernandez Perez said.

Commissioners acknowledged the importance of having exploration activities in the area to ultimately obtain resources. Commissioner Alma Porres Luna highlighted the fact that Shell has decided to use a local contractor to conduct these activities.

Shell will use the Muralla IV semi-submersible platform, built by Mexico-based Grupo R.

Shell´s exploration plan, which was originally approved in June 2019, will now go from $104 million to $345.8 million, as the company decides to drill more to better understand the reservoir.

Xochicalco is located in the Perdido fold belt, an area with very little prior exploration activity and far from any existing infrastructure, which makes it technically challenging, Rodrigo Hernandez, another technical advisor said in June 2019, when the plan was approved.

The block, included in contract CNH-R02-L04-AP-PG07/2018, has only one other area near by, which is also operated by Shell, Hernandez said.

Shell won 11 blocks during Mexico´s rounds, nine of which are in Mexican deepwaters, making it the company with the biggest exposure to those formations.

Mexico's Pemex, which has drilled over 50 deepwater wells in its history without any successful results, decided in its 2019-2023 business plan to postpone all investments in deepwaters to focus on shallow-waters and onshore fields to maximize its short-term production.