April 9, 2015
Author: Bielenis Villanueva Triana, Senior Analyst, Rystad Energy
Publisher: OE Digital
In 2015, Mexico is considered one the most attractive exploration frontiers in the world due the launch of its first lease round in 75 years. However, its attractiveness competes with other nations that offer a well-established international presence, proximity to large markets and low political risks. At current low oil prices, a complete global evaluation of exploration frontiers becomes relevant for companies with capital available to spend in exploration in 2015-2016.
Rystad Energy’s evaluation of global areas for exploration includes three main aspects: country understanding, geological understanding and operational understanding. To be able to classify as a top exploration frontier, countries must score highly in these three aspects.
This includes overall knowledge of the exploration and production business in the country, i.e. tax regimes, governmental bodies, political risks, transaction markets, local content requirements, etc. Geological understanding includes a general assessment of the basins based on cross-sections, stratigraphic columns, deposition environments, hydrocarbon mix, type of traps, basin maturity, among others. Operational understanding includes an estimated cost analysis for topsides, drilling, infrastructure, Opex dependence on the type of development (e.g. conventional onshore, conventional offshore, shale, heavy oil), exploration costs and competition, among others. These three aspects have furthermore been quantified to give a total score for each country.
Out of Mexico’s 12 petroleum provinces as described by its government, six provinces hold proven hydrocarbon potential with current production or discoveries. All blocks offered in Mexico’s Round One are spread across these six petroleum provinces depicted in Figure 1. On a global scale, other attractive petroleum areas currently available for exploration have been identified also in Australia and Kurdistan.
Similar to Mexico, in Australia the most prospective areas for exploration are located across seven basins: Northern Carnarvon, Surat, Browse, Bowen, Bonaparte, Gippsland and Cooper. In Kurdistan, the areas prospective for exploration are all located into one basin, the Zagros Fold Belt, which contains all the current production for Kurdistan.
For every one of these exploration areas in Mexico, Australia and Kurdistan, the scoring of geological, operational and political understanding was generated as displayed in Figure 2 for Mexico only. Every category was ranked from one to three where higher indicates better. The weighting factor varies in each category depending on relevance for the total assessment.
Figure 2 indicates Mexico’s most attractive area to be Sureste which scores the highest when compared to the other five petroleum provinces in the country. Among all six petroleum provinces in Mexico, reservoir depth appears to be a high scoring characteristic with depth conveniently ranging between 2,000-4,000 meters. Even though the highest potential resources in Mexico are expected in the deepwater of the Gulf of Mexico area (Golfo de Mexico Profundo), due to its geological similarities to its American extension, the expected high competition for the development in this area makes it rank slightly below Sureste. The total score for Mexico is estimated at 6.5 in a 1-9 scale.
When compared with other significant exploration frontiers in 2015 such as Australia and Kurdistan with total scores of 6.9 and 6.7 respectively, Mexico’s score is considered to be low. Among these three nations, Australia scores the highest overall, mainly because of the country evaluation scoring of an outstanding 2.5. The stable political environment of Australia, in combination with low levels of average government-take and corruption, make this nation among the most attractive petroleum frontiers in the world. Kurdistan, similar to Mexico, scores low in the country evaluation but its operational score is an outstanding 2.6. The significantly low costs for finding and operating hydrocarbons in Kurdistan, in combination with a high exploration activity and high surface accessibility to the prospective areas, make Kurdistan an attractive exploration frontier.
Even though Mexico scores lower than Australia and Kurdistan in a global screening evaluation for exploration, this country is still the most attractive exploration frontier of the western hemisphere. Operators with a portfolio focused in this part of the world should be highly interested in investing in Mexico.
Contact: Bielenis Villanueva Triana, Senior Analyst
Phone: +47 24 00 42 00
Mobile: +47 48 10 87 55
Contact: Julia Weiss, VP Marketing
Phone: +47 24 00 42 90
Mobile: +47 48 29 87 61
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), Africa as well as South East Asia.