Page 5 - LatAmOil Week 37 2022
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LatAmOil                                     COMMENTARY                                            LatAmOil


                         The trouble with service contracts   that it hopes to sign at least 30 service contracts
                         In any event, Pemex has submitted a develop-  for various projects, but so far the commission
                         ment plan for Lakach to the National Hydrocar-  has not given a green light to any of them.
                         bons Commission (CNH), Mexico’s national oil
                         and gas regulator. That development plan calls   Filling a seat at CNH
                         for NFE to work under a service contract, as was   There could change in the near future, as Roge-
                         the practice for Pemex’s foreign partners prior   lio Hernandez Cazares, the leader of the CNH,
                         to the passage of wide-ranging energy reforms   resigned unexpectedly at the end of August,
                         in 2013-2014.                        stepping down before the end of his seven-year
                           Under a service contract, NFE would be paid   term, which began in 2020.
                         a fee instead of receiving a share of output, as   Natural Gas Intelligence reported on Sep-
                         would be the case under a production-sharing   tember 12 that Mexican President Andres
                         arrangement. Meanwhile, Pemex would retain   Manuel Lopez Obrador had drawn up a short-
                         full ownership of the site and absorb all finan-  list of three candidates – Romeo Antonio Rojas,
                         cial risks in the event that gas prices dropped   Pemex’s deputy head of strategic projects and an   The CNH has
                         below expected levels. It would also be able to   engineer with experience in extra heavy crude
                         start work more quickly, as it would not have to   oil projects; Agustin Diaz Lastra, a member of   generally not
                         carry out a competitive public tender a different   Pemex’s board of directors and an economist   responded
                         kind of contract, such as a farm-out for an equity   who has also held various public-sector posi-
                         stake in Lakach.                     tions in his home state of Tabasco; and Jose   favourably to
                           The NOC appears prepared to confront those   Sanchez Perez, the chief administrator of the
                         risks in exchange for the right to develop a major   Tehuantepec Isthmus Corridor (FIT) railway  Pemex’s request
                         asset on its own.                    project, who has a background in economics.
                           However, Reuters reported on September 13,   At present, none of these candidates is a   for permission
                         citing no less than eight sources close to the mat-  known quantity. That is, it is not clear whether   to develop fields
                         ter, that the commission had withheld approval   any will be more receptive to Pemex’s request for
                         because it was not convinced that this devel-  permission to proceed with development under   under service
                         opment plan met the standard of being both   a service contract with NFE.
                         technically and economically viable. Two of   However, Lopez Obrador’s policy prefer-  contracts with
                         the sources said that CNH members had raised   ences are fairly well known. The president has
                         questions on economic grounds, specifically   been a champion of Pemex – and a champion   third parties
                         criticising estimated drilling costs and produc-  of the idea that the state-owned company ought
                         tion forecasts as too high.          to take a leading role in the oil and gas indus-
                           These critiques are not exactly surprising,   try. Presumably, then, his preferred candidates
                         given that CNH members have said in the past   would be sympathetic to this view and would,
                         that they favour a farm-out for Lakach because   therefore, be more willing than Hernandez to
                         they have doubts about Pemex’s ability to carry   approve the NOC’s plans.
                         out a deepwater project of this scope and com-  Even so, it will take some time to move
                         plexity without a foreign partner that has rele-  through the appointment and approval process,
                         vant experience. (The vast majority of Pemex’s   and CNH cannot convene to discuss develop-
                         upstream operating experience comes from   ment plans until all of its members can be pres-
                         shallow-water fields.)               ent. As such, Pemex will have to wait to find
                           Moreover, the CNH has generally not   out what Hernandez’s replacement thinks of its
                         responded favourably to Pemex’s requests for   plan – and that probably means that there is no
                         permission to develop fields under service con-  chance of bringing the field on stream next year,
                         tracts with third parties. The NOC has indicated   as Romero said optimistically in July. ™


























                          Pemex has gained its offshore experience mostly at shallow-water fields such as Ku-Maloob-Zaap (Photo: Pemex)



       Week 37   14•September•2022              www. NEWSBASE .com                                              P5
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