Summary
Rigzone Newsletter quoted a Dow Jones Newswire of February 24, 2009 in which Petroleos Mexicanos announced a 170-well tender for the Chicontepec oil region. the company expects to produce 700,000 bbl/day by 2017. Chicontepec spans three states in northern Mexico. It is an aggressive effort to help offset declining oil rates. The winning bid will be picked on April 7. Work will start in May and last two years. In 2008, Pemex put out two tenders, each for 500 wells. Bidders included Schlumberger, Halliburton and Weatherford. Mexican oil production is delining 9%/year which, if continued, will end exports in six years. Chicontepec forms a main part of the strategy to bring oil production back above 3 million bbl/day by 2015. In that year, Chicontepec will be producing 511,000 bl/day. Many observers think it will be difficult to meet this schedule. A Chicontepec well will currently produce only a few hundred bbl/day. even with steady drilling, the area now produces only 72,000 bbl/day.
Analysis
The three projects taken together will require 1,170 wells. To obtain 511,000 bbl/day by 2015 means that each well will have to produce 440 bbl/day. With modern technology which will include horizontal drilling, fracturing, propping the fractures open and then installing water drive, 440 bbl/day is not an impossible task. The major unanswered question is how much will the development cost on a per/barrel basis. Well depths in the northern zone vary from 1,500 feet to 11,000 feet. In West Texas, a number of operators have reported all-in development costs of about $32/bbl. The geology of Chicontepec is more complicated than that of the Permian basin. Some existing wells date back to 1909. Newer wells were drilled from 1942 to1963. The December 22, 2008 World Production Report for 2007 published by the Oil & Gas Journal showed 884 producers in the Northern Zone with a total crude oil rate of 47,000 bbl/day or 53 bbl/day/well. Many of these old wells will have to be abandoned because of casing leaks, collapsed casing and other major defects. (I once was in the process of nippling up a set of quick ram change blowout preventers on a 25 year old casing head flange to begin abandonment operations when the rusted out casing parted and the well head fell off into the cellar.) Possibly one-half of the Pemex wells can be reentered and redrilled with horizontal laterals. To achieve the desired rate of 440 bbl/day, the new technology wells will have to produce almost ten times as much as the existing wells. Another difficulty will be that the new wells will begin declining almost immediately, certainly within 18 months. Water cuts will go up. Workovers will multiply. Lease operating costs which today in West Texas exceed $15/bbl will be closer to $25/bbl. None of these comments is to suggest that the operation is Sisyphean. Clearly with a well-engineered redevelopment program, considerable volumes of crude oil can yet be produced. But it is fair to say that the price of crude oil will have to exceed the current $40/bbl price.
