While the rest of the world of seismic exploration is scaling down in response to the current trend of depressed oil prices, the government of Mexico is beckoning to all comers and, so far, they seem to be answering.
“The good news is that we just opened this new industry last week and we’ve already received applications from many important seismic companies,” Mexico’s National Hydrocarbon Commission (CNH) President Juan Carlos Zepeda told the EXPLORER in a recent interview.
At the time of this writing, nine major companies had applied for seismic permits in Mexico, he said:
- GX Technology.
- Dolphin Geophysical.
- Spectrum ASA.
“Here in Mexico, we went through an important reform last year in terms of opening the industry to private investment,” said Zepeda, referring to the historic constitutional reforms passed into law in late 2013, effectively ending the 75-year-old state monopoly
on Mexico’s abundant oil and gas resources.
“This opening includes seismic activity – we just opened up our industry to develop an international seismic industry,” he added.
In late January, CNH published the guidelines and regulations by which seismic permits will be granted, which Zepeda explained are the product of a diligent public consultation process with the international industry in general and the International Association
of Geophysical Contractors in particular.
“So we received plenty of comments and reviews from international companies, including the (IAGC), and those comments were included as part of our regulations. That’s why we’re confident our guidelines and regulations are consistent with international practices,”
“So we are going to be granting permits to any exploration seismic company interested in performing and acquiring information in Mexico,” he added, “and by means of this permit, we will be granting a 12-year commercial rights period by which you will use
that period to sell the information.”
Zepeda said a decision on the specific locations and acreage available for exploration and production is “still pending,” but he indicated they would be evaluated on a case-by-case basis.
“They first present their credentials, and then we qualify them,” he said. “We make a prequalification based on their technical capabilities, and afterwards, they will present the actual seismic project.”
So far, though, Zepeda said most of the interest is offshore, which he anticipates will characterize most seismic activity.
“What different companies have told us and shown us is that they’re going to shoot seismic offshore in the Gulf of Mexico and they will cover pretty much the whole Gulf of Mexico on the Mexican side,” he said. “They’re covering pretty much the whole Mexican
side of the Gulf of Mexico with 2-D seismic and some 3-D seismic.
“But, of course,” he continued, “as soon as we receive those technical proposals and projects and get approval from CNH, we will make that information public.”
Low Prices, No Problem
While other parts of the world are seeing a sluggish seismic industry owing to plummeting oil prices, Zepeda said that’s not a concern in Mexico.
“The prices are not a problem,” he said.
“When you shoot seismic, the acquisition of the information takes around three years. So these companies don’t have a short-term vision. They’re looking in the long-term,” he explained. “This is information that’s going to support investment decisions in
four or five years. So they’re not looking at the short-term price.”
Seismic prospects aside, not everyone shares Zepeda’s optimistic appraisal of the current oil market, nor Mexico’s place within it.
In a recent teleconference with investors, Occidental Petroleum CEO Steve Chazen described the financial terms offered by Mexico as “ridiculous,” especially in light of today’s prices.
“If you look at some of the other places, I won’t say where, but look at some of the other places where intrinsically the asset might work at $20 a barrel or something like that, but if you lay the contract over it doesn’t really work at today’s prices.
And I think that’s the issue in Mexico,” he said. “While the asset may be attractive and you can get a lot of – if you had 100 percent of it would be something that would work pretty well, but they have taken a pretty aggressive view about the contract terms.
“I think we would rather frankly put the money into the CO2 projects in the United States where we have low royalties and in fact in some cases we owe the royalties than to fool around with some ridiculous contract in hopes it gets better over time,” he
Zepeda didn’t appear to put much weight into Chazon’s criticisms.
“We are having a lot of interest from different oil companies,” he told the EXPLORER.
“We already have 23 applications from major international oil companies taking part in the first bidding round in Mexico. So, we’re getting a lot of interest and we’re happy about that, especially considering the drop in oil prices,” he added.
However, Zepeda also added that the current financial terms are hardly set in stone.
“We are open to receive all kinds of comments regarding the contract in all of its aspects, and the Mexican government will be making the required adjustments,” he said. “So we are taking very seriously any comments provided by the industry. I encourage
the industry to send CNH their comments regarding any aspect of the contracts and the bidding guidelines.”
Zepeda said comments can be made through the CNH website.
For now, though, with the country now open for seismic exploration, Zepeda said the amount of data on Mexico’s hydrocarbon resources will increase dramatically.
“Regarding these new regulations for granting the seismic permit,” he said, “the impact that this will have on Mexico and the industry, and from what I have seen, from the plans that seismic companies are considering, we are expecting the seismic information
in Mexico will more than double in three or four years.”