Offshore Exploration Heats Up in Mexico

Shell is pushing forward with a four-well deepwater drilling program off Mexico's coast, headlining what looks to be a busy year for exploration by international oil companies.

Drilling is set to kick off in the coming months for about a dozen offshore wells, largely deepwater, data from Mexican upstream regulator CNH shows.

Shell has already finished drilling at one new well, Aluk, for which results are not available yet, and kicked off work at another, Jokol, in the Salina Basin in the southeastern part of the country, a spokeswoman said. Next up are the Itzcali and Luwa wells in the northern Perdido area.

Shell has the Noble Voyager drillship under contract through October 2023. It is partnered with QatarEnergy in the Perdido blocks and with Chevron on the Aluk well.

Shell will be hoping for better results than it realized with its initial five-well push in the region, which kicked off in 2020 but failed to yield a commercial discovery. The supermajor moved aggressively to capture large swathes of acreage in Mexico’s second deepwater bid round in 2018, with work commitments amounting to 13 wells.

Easing Back In

Shell is pushing ahead despite the nationalist energy policy of Mexican President Andres Manuel Lopez Obrador, which has soured the environment for external investment. Other companies are also seeing through their planned programs, albeit with mixed results.

Drilling activity in Mexico's waters declined in 2022, but records show that another ramp-up is imminent amid the larger global call for more supply in the fallout of the Ukraine crisis. Oil and gas firms are also loosening their purse-strings a bit for selective exploration activity.

Italy's Eni is one company that has found success in Mexico's offshore, both with exploration and from revamping and producing from a discovery that state oil firm Pemex never developed. A new floating production, storage and offloading (FPSO) vessel was installed last year in the shallow-water Area 1 field in the Salina Basin, which includes the Amoca, Mizton and Tecoalli fields. The CNH reported that output from the field averaged more than 20,000 barrels per day in December.

The Italian major is rolling the dice again in the Salina Basin with the Yatzil-1EXP and Nabte-1EXP wells, located in shallow and deep waters, respectively. Eni has hired the Valaris DPS-5 drilling rig, with operations to kick off as soon as January.

Malaysian state oil company Petronas is looking to drill a pair of deepwater wells in the Salina Basin as well, Coatlicue-1EXP and Naajal-1EXP. The company has contracted the Noble Globetrotter 1 drillship through March.

European independent Wintershall has also permitted two shallow-water wells, Ix and Kan.

Mixed Bag

Not all of the recent exploration work off Mexico has been fruitful.

A long-awaited follow-up well from Murphy Oil came up dry, according to its recent fourth-quarter earnings report. The company told investors in late January that its Tulum-1EXP well, a follow-up to the 2019 Cholula discovery in Mexico’s southern Salina basin, did not find commercial hydrocarbons. Plans to drill the well had been delayed since before the Covid-19 pandemic began in early 2020.

Meanwhile, Chevron has decided to leave the Area 3 Block in the Perdido Fold Belt, which it acquired in Mexico's first bid round. But it only committed to conduct seismic work there and did not make any plans to drill a well.

The US supermajor retains an operated stake in Area 22 in the Salina basin, which it captured in the country’s second deepwater bid round. The company has committed to drill one well in the block.