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“Status of Mature Fields Rounds” September 2012 Manuel Cervantes Berezowsky & Cervantes, S.C.

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Presentation on theme: "“Status of Mature Fields Rounds” September 2012 Manuel Cervantes Berezowsky & Cervantes, S.C."— Presentation transcript:

1 “Status of Mature Fields Rounds” September 2012 Manuel Cervantes Berezowsky & Cervantes, S.C.

2 First round – South Region mature fields Santuario & Magallanes Blocks Carrizo Block Second round – North Region mature fields Bid Procedure; Participation Structure Arenque & Atun cases Contractual aspects Implementation aspects Areas of Opportunity Chicontepec project: 2 months?? (subject to internal approvals)(field development project) I NTRODUCTION

3 M ATURE F IELDS Mature fields: abandoned fields or in process of abandonment (statutory definition) Multidisciplinary attention What is required?Re-studies New concepts & traditional service lines Technology (secondary & improved recovery) Mature fields entails: Marginal profitability Exceeded, unnecessary or inefficient facilities Relevant investment Technical-human resources Environmental matters Knowledge of economic model *Source: Brightconnections

4 Bidding procedure: 6 months (March to August 2011). 3 incentive based contracts: Magallanes, Santuario and Carrizo -Total Surface: 312 Km 2 F IRST R OUND (T ABASCO )

5 S ANTUARIO & M AGALLANES *Source: EnergyTreaty Petrofac  big winner in first tender Aggressive offer of 5.01 USD per barrel (a tariff just 0.01 above the floor established by Pemex) Contracts signed in October 2011 Period of effectiveness: December 2011 3 month Transition Period COD: March 2012

6 C ARRIZO A REA *Source: Notimex APC was disqualified - 33.3 USD MM performance guaranty Schlumberger obtained the contract with 9.40 USD per barrel Contract execution date: December 2011 Effective date: March 2012 Transition period: 3 months COD: June 2012

7 S OME A SPECTS – S OUTH M ATURE F IELDS Too soon to evaluate performance Too soon to evaluate profitability and continuance Complexity: social & political conditions in the area (e.g. Cardenas municipality in April 2012) Poor areas; “ejido” land *Source: Pemex Website


9 S ECOND R OUND – B ID P ROCEDURE Three workshops with bidders 2 stages: Prequalification & Submission of Fee per Barrel. Directly or using the experience of a holding company or affiliates. Prequalification: Legal, technical and financial (credit rating). Higher rating than previous bid Commitment Bond = USD$1MM; enforceable if: (i)Awarded bidder does not execute the contract; or (ii)Bidder submits false information. Submission of proposals and award in the same act. - Pemex’ max and min fee disclosed in such act. *Source: Notimex

10 PARTICIPATION STRUCTURE Mainly attractive to Integrated services companies; Mexican firms Small & mid size producers (brownfield experts) Current scheme grants 25 – 30 years of exclusivity for the contractor in the Area Joint Ventures Partnerships Foreign Companies Mexican Companies Foreign Experience & Financing 40% National Content - statutory requirement - Consistent with NAFTA - Value created in Mexico

11 S ECOND R OUND (N ORTH R EGION ) Contractual Area Pemex Minimum Fee (U.S. Dollars) Pemex Maximum Fee (U.S. Dollars) Winner Bidder and Fee proposed (U.S. Dollars) Atún No proposals submitted Altamira $5.00$11.07 Cheiron Holdings Limited $5.01 Pánuco $5.00$11.88 Dowell Schlumberger de México & Petrofac México $7.00 Tierra Blanca $3.00$9.13 Monclova Pirineos Gas & Alfasid del Norte $4.12 San Andrés $3.40$7.57 Monclova Pirineos Gas & Alfasid del Norte $3.49 with an increase factor of $2.601* Arenque $2.50$7.25 No bidder was awarded since all of the four fee proposals exceed the maximum fee per barrel determined by PEP.

12 THE CASES OF ARENQUE & ATÚN Arenque and Atún Contractual Areas were not awarded. Atún: Desert (no proposals to PEP). Not to be launched. Arenque: PEP defined a minimum and maximum fee per barrel. All bidders exceeded the cap. Invitation to Arenque’s prequalified bidders, but only Petrofac submitted proposal. On August 28 th, PEP confirmed that Petrofac will commence the procedure for the direct award of Arenque for a $7.90 fee per barrel. Arenque: estimated recovery factor of 11%.; initial oil 1.2 billion barrels. In the first two years, if awarded, Petrofac will commit approximately US$50 million in capital expenditure. Fee/BarrelPEPDragados Offshore de México Burgos Oil Services SaimexicanaPetrofac de México Maximum$7.25$10.78$24.00$13.00$12.50

13 C ONTRACTUAL A SPECTS (2 ND R OUND ) Contract’s Term: 30 years in 3 stages: Transition Period - up to 3 months Initial Period - up to 2 years Development Period - 28 years Reimbursement of Eligible Expenses: 100% Exploration Expenses 75% Operation Expenses Payment to Contractor subject to delivery of oil Minimum Work Requirement – Depending on 2P Reserves Initial Commitment (2 years - USD): AltamiraArenquePánucoTierra BlancaSan Andrés $32,916,401$50,436,068 (?)$35,304,936$24,148,328$23,938,246

14 I MPLEMENTATION Corporate Guaranty & Performance Guaranty Effective Date: October 1 st, 2012. COD: January 1 st, 2013 Work Program and Budget for the initial 2 years Environmental Status of the Area (initial study - liabilities) ESHIA analysis/plan Measurement & delivery equipment Notice of Continuance  if profitable Community impact *Source: Pemex Website

15 AREAS OF OPPORTUNITIES Labor market  increase in the relevant areas (Tamaulipas, Veracruz) Universities – new generation of engineers Community development Environmental analysis Subcontracting, such as: Engineering Drilling Oilfield studies Seismic Workover, etc.

16 “Chicontepec Project”

17 CHICONTEPEC (ATG) Different to mature fields Resource play Entails 56% probable reserves; 58% possible reserves in Mexico High potential, particular geological specifications - complex field Bid might be released at the end of Y2012 (5 - 10 contractual areas); workshops and similar bid procedure, but different economic model Not overlapping with the current 5 labs (all expire by the end of 2012). Extensions?? All of them?? Challenges: Relevant Performance Capacity Specific Technological Solutions State of the Art Technology *Source: CNNExpansión

18 Berezowsky & Cervantes, S.C. Manuel Cervantes Mr. Cervantes is an attorney and counselor-at-law, admitted in Mexico in 2000. He received his J.D. Degree from Escuela Libre de Derecho, the most important school of law in Mexico. Mr. Cervantes also received his LLM degree from Northwestern University – School of Law, Chicago, Illinois. Mr. Cervantes is partner in the Mexican law firm Berezowsky & Cervantes, S.C., and his practice concentrates since year 2000 on oil & gas, natural resources, government procurements, administrative law, anti-bribery and litigation. Mr. Cervantes has been recognized in years 2009, 2010, 2011 and 2012 as a leading lawyer in oil & gas and natural resources in Mexico by Who’s Who International. He is also recognized in “Global Law Experts”. Mr. Cervantes is current member of AIPN®. Mr. Cervantes has been an active speaker in several international forums regarding the energy reform in Mexico.

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