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Pemex doubles Ixachi oil and gas reserves to 750 million boe

Highlights

Ixachi will increase feedstock to domestic refineries

Production to peak at 80,000 b/d

Development cost estimated at $1.5 billion

Mexico City — Mexico's Pemex has successfully drilled two new wells at its Ixachi oil and gas discovery, doubling the onshore find's proved and probable (2P) reserves to 750 million boe, the state-owed company said Tuesday.

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Preliminary data shows Ixachi will reach peak production in 2022 of 720 MMcf/d of natural gas and 80,000 b/d of light crude and condensates with an API over 40, Juan Antonio Escalera, Pemex deputy exploration director, told S&P Global Platts.

Pemex drilled wells at Ixachi-1DEL and Ixachi-1001 in recent months, bringing the total number of wells drilled at Ixachi to three. The Ixachi field is south of Cempoala, Veracruz, and will be able to supply Mexico's central and southern region.

This discovery has been the result of over 70 years of work of assessing the Veracruz Basin, Escalera said.

"This is the success of several generations of Pemex's engineers through many decades with the implementation of new technologies," he said.

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Pemex estimates the project now holds 1.3 billion boe of proved, possible and probable (3P) reserves. This would make Ixachi the fourth-largest onshore discovery in the world in the last decade, Escalera said.

Ixachi is a technically challenging field with a depth, temperature, and pressure similar to other giant foothill fields, such as the Rubiales in Colombia and the El Furrial in Venezuela.

DEVELOPMENT PLAN

Pemex's preliminary development plan includes drilling more than 40 development wells at a cost of more than $1.5 billion, Carlos Trevino, Pemex general director, said at an event Tuesday announcing Ixachi's progress.

"The expected value of the total production of Ixachi is worth $40 billion," Trevino said. "Based on these numbers, you can see how profitable this project will be."

Pemex has been performing production tests at its Ixachi-1EXP well since March, reaching sustained output of 29 MMcf/d and 3,270 b/d of oil, Escalera said. The company will not be able to produce the oil and gas commercially until its production plan is approved by the National Hydrocarbon Commission, which Escalera said could happen by 3Q 2019.

Pemex has been doing early production tests at Ixachi-1DEL over the last week, obtaining similar production levels to Ixachi-1EXP. This assessment well found a 1,200-meter thick hydrocarbon column, which allowed Pemex to double the reserves at the Ixachi project, Escalera said.

Escalera said Ixachi is expected to produce 300 million barrels of light crude and condensate over 20 years.

REFINERY FEEDSTOCK

Nearby infrastructure will allow expediting the development of Ixachi, Juan Javier Hinojosa Puebla, Pemex E&P director, told Platts.

"The location of Ixachi will allow us to increase the feedstock to our refineries and gas supply to the market," Hinojosa said.

Hinojosa said the field is 14 km (8.7 miles) away from the 30-inch diameter Cosolecaque-Venta de Carpio gas pipeline and the 30-inch diameter Nuevo Teapa-Tula Salamanca oil pipeline.

"We have to discuss the commercial strategy for gas within Pemex, including the downstream division," Hinojosa said.

Ixachi could feed Pemex's 315,000 b/d Tula and 220,000 b/d Salamanca refineries in central Mexico. Both refineries have a simple configuration preventing them from processing Mexico's heavy crude efficiently. The refineries are currently operating below capacity due to the lack of light oil feedstock.

Based on preliminary estimates, the liquids production cost of $5.5/b, including transportation and other associated costs this would be under $10/b, Hinojosa said.

MORE IXACHI-LIKE TARGETS IDENTIFIED

Pemex is currently drilling the Cruver-1EXP exploratory well south of Ixachi. The well is expected to be completed in the coming weeks and undergo production tests in January.

Cruver could hold 300-400 million boe of prospective resources, Hinojosa said. This well will prove the extension of this foothill formation south of Ixachi, he added.

The Ixachi discovery has been an important step to prove the potential of the 300-km Cordoba platform along the Veracruz Basin, Hinojosa said.

"Over the coming years, Pemex will have to acquire new seismic data and carry multiple geochemical studies to continue the evaluation of this new frontier play," he added.

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

-- Edited by Joe Fisher, newsdesk@spglobal.com