ENERGY ALERT

Download PDF
1 downloads 155 Views 188KB Size Report
Comment
Aug 16, 2017 - by a proposal for amending the exploration plan for this Asignacion. PEP prosed two different scenarios (
August 16, 2017

ENERGY ALERT Recent developments in the Oil & Gas industry in Mexico: 1) The CNH approved changes to the development plan for the Asignacion Perdido Fold Belt-12; 2) The CNH assessed the verification of the Minimum Work Commitment for Pemex exploration Asignaciones; 3) The CNH published changes to the contracts for the Ayin-Batsil, Ogarrio and Cardenas-Mora Farmouts; 4) The CNH reported on the status of the Protected Natural Areas and Safeguarded Zones for block 30 of Round 2.4. This past August 14, the governing body of the National Hydrocarbons Commission (CNH, Spanish acronym) approved changes to the contracts covering the Ayin–Batsil, Ogarrio and Cardenas–Mora farmouts. The CNH also authorized changes to the exploration plan submitted by Pemex for the AE-0094-M-Perdido Fold Belt-12 Asignacion. On August 15, the CNH reported on the status of the Protected Natural Areas and Safeguarded Zones of block 30 (Yucatan platform) corresponding to Round 2.4. The CNH also released the results of its assessment of the verification of the Minimum Work Commitment for Pemex Exploración y Producción (PEP) exploration Asignaciones and issued its recommendations to the Ministry of Energy (SENER, Spanish acronym) in this regard. 1) Changes in the exploration plan for the Perdido Fold Belt-12 Asignacion On August 10, 2017, SENER authorized PEP to extend the exploration period for the Perdido Fold Belt-12 Asignacion for an additional two years. PEP’s extension request was accompanied by a proposal for amending the exploration plan for this Asignacion. PEP prosed two different scenarios (base and incremental) of activities to be performed during the additional exploration period.

Based on the information submitted by PEMEX, the CNH planned to include the base scenario activities as part of the obligations under the Minimum Work Commitment for the additional exploration period (equal to 170,387 work units); however, based on its analysis of the actual aim of the additional exploration period for the Asignaciones in question (i.e., progress to the extraction stage, quantification of reserves, and declaration of commercial discovery), the CNH concluded that this Minimum Work Commitment might be a superfluous requirement that will make it impossible to move on to the next stage, even if the declaration of commercial discovery objective has been met. Based on the above, the CNH authorized the changes to the exploration plan, but recommended that the SENER not include the base scenario obligations as part of the Minimum Work Commitment. The authorization included a reference to the rule under the 6th transitory article of the constitutional reform that establishes that PEP shall have two years as of the conclusion date of the exploration period (August 28, 2017) to declare the Asignacion a commercial discovery, and if this objective is not met, the Asignacion may not progress to the extraction stage and PEP shall forfeit the Asignacion. 2) Verification of the Minimum Work Commitment for Pemex exploration Asignaciones This past August 15, the CNH released the results of its assessment of the verification of the Minimum Work Commitment for Pemex exploration Asignaciones. This assessment (and the related recommendations) shall be the basis for the SENER’s decision to extend the exploration period for the Asignaciones. The assessment report indicated that out of the 108 Exploration Asignaciones granted by Pemex during Round 0, two Asignaciones have migrated to Farmout and three are currently the subject of relief proceedings (amparo), while the remaining 103 Asignaciones were included in the assessment performed by the CNH. The assessment process covered compliance with the mandatory investment obligation and the following physical goals: • Studies • 2D and 3D seismic survey • 2D and 3D processing • Electromagnetics • Well drilling The results of the CNH assessment were as follows:

Source: National Hydrocarbons Commission

Based on the results of the assessment, the CNH concluded that the 37 Asignaciones that were in compliance with the Minimum Work Commitment would be approved by the CNH to receive a 2-year extension of the exploration period. For the 66 remaining Asignaciones, the CNH provided a list of considerations that it believes the SENER should take into account in determining whether to extend the exploration period: Legal considerations • It was clarified that Pemex was unable to carry out exploration activities in unconventional onshore fields, since these blocks are not regulated by the CNH. • Reference was made to the rule regarding first-hand sales of natural gas, since the prevailing maximum natural gas price through June of this year made it difficult to invest in blocks that are predominantly natural gas fields due to the low profitability of natural gas. Technical considerations • The Minimum Work Commitment for the Asignaciones was established when the price per barrel of crude was around USD 100. The dramatic reduction in oil prices curbed the amount of available investment capital, thus decreasing the likelihood of meeting the Minimum Work Commitments for all of the Asignaciones. • Based on this assessment, it was determined that the exploration periods established for the Asignaciones were too short to be able to comply with the Minimum Work Commitment, particularly when compared to the periods established in the Hydrocarbon Exploration and Extraction Contracts. Also, as mentioned above, the aim of the CNH’s assessment was to provide the SENER with information on which to determine whether to extend the exploration period for the Asignaciones. If the extension is granted, in accordance with the 6th transitory article of the constitutional reform (referred to above), Pemex will have two years as of the conclusion date of the exploration period (August 28, 2017) to declare a commercial discovery in the Asignacion, at which point, based on this discovery declaration, Pemex could ask the SENER to change the Asignacion Title from exploration to extraction. In other words, if there is no declaration of commercial discovery by the end of this period, the Asignacion may not be transferred to the extraction stage and PEP shall forfeit the Asignacion. Therefore, given the current level of compliance with the physical goals and the brevity of the additional period that could be granted by the SENER (two years) for the Asignaciones, the CNH concluded that many of the Asignaciones would have periods that are too short for there to be a declaration of commercial discovery, even considering the additional exploration period granted. As a result, the CNH made the following recommendations to the SENER: • Recommend to Pemex that it migrate to Farmouts any Asignaciones that it deems suitable. • Grant new Asignaciones to Pemex based on the current circumstances of the fields in question and the technical and financial capabilities of Pemex. • Modify the Asignacion titles to establish that the condition for an Asignacion to progress from the exploration stage to the extraction stage will be a declaration of geological discovery rather than commercial discovery (given that the latter takes l longer to occur). 3) Changes to the contracts for the Ayin-Batsil, Ogarrio and Cardenas-Mora Farmouts Based on the recommendations submitted by the SENER and Pemex, this past August 14, the CNH approved a series of clarifications related to the Ayin-Batsil, Ogarrio and Cardenas-Mora Farmouts. A summary of the most important changes to the contracts is provided below; however, more detailed information about the changes may be found in the relevant documents on the CNH website (http://rondasmexico.gob.mx/): 1) The change in operator must be carried out in accordance with clause 25 of the contract (clause 22 for the Ogarrio and Cardenas-Mora contracts) and the Applicable Rules and Regulations.

2) The requirements for extending the Contract term were adjusted in order to avoid duplicating the Contract terms and conditions related to adjustments made to the Development Plan resulting from authorized term extensions. a. The obligations related to delivering work schedules, the budgets corresponding to work schedules and the production profile expected for requesting contract extensions have been removed, and henceforth the development plan shall only be modified to reflect the technical and operating conditions of the contractual area. 3) The related clauses in the Contract were simplified to indicate only that the calculation, determination and payment of considerations shall be carried out in accordance with annexes 3, 4 and 8. 4) It was clarified that the transparency and anticorruption declarations must be made individually by each undersigned party of the Consortium on a separate basis. 5) It was established that if the Energy Regulatory Commission (CRE, Spanish acronym) does not determine the Contractual Price of Natural Gas, said price shall be determined following the procedures established by of the Ministry of Finance and Public Credit (SHCP, Spanish acronym). a. Applicable if the Contractors sold less than 50% of the volume of Natural Gas produced In addition, for the Ogarrio and Cardenas-Mora Farmouts only, the time limit for the contractor to submit the development plan to the CNH was extended from 120 to 180 days. 4) Status of block 30 of Round 2.4 On August 15, the CNH reported on the situation of the Protected Natural Areas and Safeguarded Zones for block 30 (Yucatan Platform) of Round 2.4. The CNH reported that the Yucatan Platform block is less than 44 km from the nearest Mexican Protected Natural Area (namely, the Escorpion Reef National Park). It is also less than 20 km from the Safeguarded Zone corresponding to the Escorpion Reef, as can be observed in the image below:

Based on the above, it was concluded that block 30 is clearly far enough away from any environmentally restricted area, and thus, it is able to proceed with hydrocarbon exploration and extraction activities.

Contacts: Alfredo Álvarez [email protected] Rodrigo Ochoa [email protected] Enrique Pérez-Grovas [email protected] Javier Noguez [email protected] Rodrigo Mondragón [email protected] Jimena González de Cossío [email protected] José Fano [email protected] Yuri Barrueco [email protected] Elizabeth Ceballos [email protected] Salvador Meljem [email protected]