Mexico is the ninth largest producer of oil in the world and the eleventh largest in terms of net exports. Mexico 's main upstream attraction is a potentially vast resource base. Pemex estimates that yet to be discovered oil & gas reserves could total as much as 115 billion barrels of oil equivalent, roughly three times as much as current proven, probable and possible reserves (3P). According to some preliminary estimates, investment needs will range between US$35 billion and US$100 billion over the next decade.
Mexico's historic energy reform announced in 2014 has established a new legal framework for Mexico's energy industry and is expected to attract the billions of dollars in foreign investment needed to revitalize Mexico's oil and gas industry. The Secretaria de Energia (SENER) has issued a five -year, four round tender plan (2015-2019) for the denationalization of 914 oil and gas blocks. IFR believes that there are a significant number of under exploited oil & gas fields in Mexico that will be issued in these bidding rounds.
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In August 2014, SENER began the bidding process for assets by announcing that Round One would include: (i) 169 blocks, comprised of 109 exploration blocks and 60 production blocks and (ii) 14 blocks under joint ventures with PEMEX. The tender process commenced in the first quarter of 2015, and license agreements were awarded throughout 2015 and into 2016.
International Frontier is an Early Mover in Mexico
International Frontier was an early identifier of the Mexican oil and gas opportunity and has now achieved its initial goals which are as follows:
- Partner with an experienced local operator;
- Set up a 50/50 jointly owned Mexican company with its partner; and
- Participate in bidding and win an onshore license in Round One
On October 1st 2015, IFR was pleased to announce that it had entered into a strategic joint venture agreement with Mexican petrochemical leader, Grupo Idesa S.A. de CV ("IDESA"). The joint venture allows for the evaluation and joint study of business opportunities in the Mexican oil and gas sector, in particular the first bidding round of the Onshore Blocks of the "Ronda 1" bidding process from the Mexican government. Read the news release
IFR, through its Mexican subsidiary Petrofrontera, and Grupo Idesa formed a 50/50 joint venture company in Mexico "Tonalli Energia, S.A.P.I de C.V." This agreement and formation of Tonalli Energia represented a significant milestone for IFR as we enter into the Mexican oil and gas industry partnered with a leading Mexican downstream corporation. IFR believes IFR and Idesa's combined strengths are complementary in the pursuit of building a successful exploration and production Company in Mexico.
On May 12, 2016 Tonalli Energia was notified by the Mexico Comision Nacional de Hidrocarburos (CNH) that it had been awarded the Onshore Oil and Gas Development Block 24 (Tecolutla Block) with an incremental royalty of 31.22%. Tonalli's royalty was modeled and bid to allow for a competitive rate of return and compares favorably to royalties bid on other Round 1.3 winning bids. On 10 of the 25 blocks, the incremental royalty will be in excess of 60% with three of these blocks having incremental royalties in excess of 80%. Read the news release
The Tecolutla Block is a 7.2 km2
block in the Tampico-Misantla Basin located within the state of Veracruz. The producing carbonate oil reservoir in the Tecolutla Block is the El Abra formation at a depth of 2,340 meters. 3D seismic has been acquired over the entire block and 7 existing vertical wells have been drilled by Pemex to bring the field into production. Cumulative production on a well by well basis from four key vertical wells has been 316,000, 507,000, 267,000, and 352,000 barrels each to date. Like many oil and gas fields in Mexico International Frontier's technical team believes oil production from Tecolutla has not been optimized. The team has re-evaluated the field using existing well control and 3D seismic and believe that horizontal drilling and workovers will yield daily production results that exceed the historical peak production of 900 barrels per day and significantly increase recoverable reserves. To execute the plan our team intends to deploy advanced carbonate drilling, completion, stimulation and recompletion techniques in the Tecolutla Block.
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