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Mexico needs a boost in exploration investment to reverse declining production: Pemex official

Acapulco, Mexico — Mexico requires a yearly investment of $3 billion to $4 billion in exploration activities to reverse its declining production, Pemex's exploration director said Friday.

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"We require smart and focused investment to attack opportunities in known and hypothetical plays as well as new resources to reverse our declining production," Juan Antonio Escalera said at a panel discussion at the Mexican Petroleum Congress in Acapulco.

Pemex has a portfolio of discovered fields with a combined 3.2 billion barrels of oil equivalent of proven, probable and possible reserves, known as 3P reserves. Developing these fields requires $19 billion to $29.2 billion, he added.

"We have a lot of chickens we can roast, but we need the resources to start the fire pit," Escalera said.

At the same panel session, officials from Chevron, BP and Equinor said that Mexico's future is in its deepwater region.

Rion Carmelo, Chevron's exploration director, said at the panel that while Pemex has drilled just over 50 deepwater exploration wells in the Gulf of Mexico, US operators have drilled more than 1,100 wells in the US Gulf of Mexico deepwater region.

Deepwater represents an opportunity to increase its output significantly in the long term, Carmelo said. "From exploration to first oil can take 10 to 15 years."

Private companies have committed to invest $4 billion in exploration activities at blocks awarded to date, which includes drilling of 138 wells, 22 of which are in deepwater regions.

Mexico's deepwater prospective resources are estimated at 27.4 billion boe, of which 22% was awarded to Pemex in hydrocarbon round zero and 41% in subsequent auction rounds to private companies, Escalera said.

However, a key area for the future of Mexican oil production is shale resources. The country has 60 billion boe of prospective shale resources.

Of these, only 9% were given to date to Pemex in round zero. Mexico is auctioning in February its first round of blocks in the Burgos Basin for shale gas to private operators.

Escalera said that Pemex is currently drilling its first three shale wells this year in the Anhelido and Puchut blocks with the aim of evaluating resources and incorporating reserves from these areas.

PRIVATE COMPANIES ARE PARTNERS OF MEXICO

The BP, Chevron and Equinor officials at the panel said they aim to create a long-term relationship with Mexico, which has the potential of becoming a major production center in their global portfolios.

The energy reform has given Mexico's oil industry dynamism, and the officials expect President-elect Andres Manuel Lopez Obrador will continue it.

Jacek Jaminski, BP Mexico's exploration manager, said he is optimistic that private companies and the incoming administration will collaborate.

"Are we in BP excited about the future of exploration in Mexico? Absolutely," Jaminski said. "We are optimistic the incoming government will continue the energy reform and respect contracts awarded."

Monica Boe, Equinor Mexico's CEO, said Mexico has to continue the reform with a stable fiscal and regulatory regime to allow it compete with other major deepwater basins like Brazil.

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com