SPE-199010-MS

Development Strategies in the Sureste Salina Del Istmo Basin: Sustainable

Production Replacement Options

Maziar Zarea and Kareemah Mohamed, IHS Markit

Copyright 2020, Society of Petroleum Engineers

This paper was prepared for presentation at the SPE Latin American and Caribbean Petroleum Engineering Conference originally scheduled to be held in Bogota,
Colombia, 17 – 19 March 2020. Due to COVID-19 the physical event was postponed until 27 – 31 July 2020 and was changed to a virtual event. The official proceedings
were published online on 20 July 2020.

This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
of the paper have not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessarily reflect
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Abstract
With the advent of the Mexican Energy Reform, foreign companies have flocked to the southern Gulf
of Mexico (GoM) attempting to replicate the same level of commercial success as seen in the U.S.
GoM. There have been recent notable discoveries as well as significant untapped potential in existing
discoveries (approximately 12 Bboe 2P remaining recoverable reserves), largely in the shallow waters of the
infrastructure-rich, re-emerging Sureste basin. These fields present a near-term path to production to stem
Mexico's production decline. In the Sureste Basin, 54% of offshore fields have field sizes of less than 100
MMboe 2P recoverable reserves and are in the discovery/appraising phase. We have developed a screening
method which ranks field candidates for near term development to add much needed oil production.
Additionally, for these top ranked fields, through leveraging a combination of the following factors can
result in 3.4 Bboe of 2P recoverable reserves monetized within 3-4 years with an overall cost reduction.
The concept of "Hub and spoke" field development can be used to approach to utilize existing platform
capacity and tie in marginal fields. Utilizing modular and standardized platform configurations which can
result in a compression of development cycle times by using "off the shelf" designs. By reducing non-
productive rig days, there can be a overall need for less rig mobilization. Digitalization enabled potential
change in the operating model, facing a potential 60% reduction in offshore staffing due to relocation of
maintenance crews onshore.
To achieve this cost reduction target identification of field candidates is vital. This screening methodology
employs a cross functional approach to optimizing subsurface reserves while incorporating above-ground
risk, linking existing infrastructure capacity and new technology deployment. This methodology was
applied to 30 discoveries in the Sureste basin which have never been produced and modeled 3 cases
evaluated on time to first production and cost reduction. This can contribute to the enhancement of Mexico's
energy sector and present acquisition targets to operators and infrastructure owners. These concepts may
be applied to other analogous asset types.
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Introduction
Mexican liquids output has declined for 14 consecutive years, having peaked in 2004 at nearly 3.4 MMb/
d. Production has declined over the last five years at an average annual rate of 7%. This rate of decline
is high compared with other major oil-producing countries, and it compounds the challenge to meet the
government's 2024 target. (Fig 1)
In efforts towards supplying steady demand growth to 2.4 MMb/d by 2024 the Sureste basin provides
both existing discovered offshore fields and a relatively faster time to production compared with some of
the frontier exploration initiatives undertaken by foreign players in Mexico's offshore.
The Sureste basin has a blend of declining fields, new discoveries, prospects, heavy/light oil and gas.
Utilizing a holistic opportunity screening methodology for existing fields will identify complementary "fit
for field" technologies which can lead to a quicker path to first oil, reduced operating cost or increase the
recoverable reserves.

Figure 1—Mexican Liquids Production & Forecast

The Sureste basin currently accounts for 90% of Mexico's overall production. The production forecast
(Fig 2) for Mexico sees over 40% of future production (from 2020-2023) coming from fields on the shelf,
primarily located in the Salina and Comalcalo sub-basins in the Sureste parent basin using the production
platform and wellhead & tieback development concepts.
We also examine three case studies of fields in shallow water (< 100 m) which have been modeled
to highlight the importance of candidate selection for development plans and key drivers for turning
uneconomic offshore fields into economically viable development options. In efforts to stem Mexico's
hydrocarbon production decline and supply steady demand growth in the short to medium term, the Sureste
basin provides both existing discovered offshore fields and a relatively faster time to production compared
to some of the frontier exploration initiatives undertaken by foreign players in Mexico's offshore.
SPE-199010-MS 3

Figure 2—Mexico production forecast by Terrain

Resource Potential
The Sureste Basin in the Bay of Campeche is considered a Super-basin, meaning it has produced over 5
billion boe with at least 5 billion boe reserves potential left. The basin's onshore sector is a relatively mature
territory, with more than 7,000 development wells known to have been drilled. In contrast, only 1,353
development wells have been drilled offshore. Total recoverable reserves of the Sureste Basin currently
stand at approximately 61 2P Bboe (Source: IHS Markit IRIS21 Database) The Sureste Basin comes 2nd in
the ranking of basins with top number of fields with total recoverable volumes of 100 2P mmboe or more,
to the East Venezuela Basin of Venezuela. (Fig. 3) The definitions of Large, giant, and super giant fields are
100-499 MMboe, 500-999 MMboe, 1000 mmboe>, respectively. (Stark 2017)

Figure 3—Sureste basin field ranking by field size compared to other LATAM Basins

Oil production from this basin averaged 2.4 MMb/d from 133 fields in 2018 and this accounts for 96% of
Mexico's overall oil output and 70% of gas production. The main producing is complex is the Ku-Maloob-
Zaap (KMZ) conglomerate of fields. Basin exploration success rates in the offshore range from 27-30%
with the most recent larger discoveries in a new recently proved play horizon.
Included in this study are 22 fields with sizes varying 5 to 40 MMboe with light oil quality and varying
reservoir quality. Sub-salt Jurassic plays, such as tested in the Pokoch field- which saw recoverable reserves
increased by fourfold (from 50 MMboe to 400 MMboe) are indicative of the near-field exploration potential
4 SPE-199010-MS

in the southern Bay of Campeche. Sub-salt compartmentalization of reservoirs, charge and source rock
maturity. The Sureste basin again is the basin with the second largest amount of discovereies in 2014-2019
with number of fields containing total recoverable volumes of 100 2P mmboe or more.

Figure 4—Top Latin American Basins by Large Field Discoveries (2014-2019)

Geological Setting
The Sureste basin reservoirs are associated with salt tectonics, structural, stratigraphic and combined traps.
The main structural styles include normal faulting with rotated blocks (Late Miocene-Holocene), salt cored
anticlines and salt rollers and diapirs (Jurassic-Late Cretaceous). This basin contains a combination of
desirable characteristics such as Neogene-age burial (thermal maturity), salt and multiple rich source rock
systems. The main play is a Cretaceous Carbonate Structural naturally fractured carbonates dominate the
profiles of the reservoirs of this play, that also comprises dolomites and carbonate breccias. Although the
single major field associated with this play is offshore, the main collective accumulation of oil is onshore,
largely centered on the exploitation of projects in the southern Reforma-Akal foldbelt.

Infrastructure
The Sureste basin is host to 377 offshore platform structures, most of which were installed in from the 1980's
– 2000's. There are multiple pipeline networks, shipping terminals and export capacity due to the decades of
oil and gas exploration and development which has been carried out by the NOC (National Oil Company).
As part of efforts to boost near-term production, the NOC plans to build 13 new production platforms,
14 submarine pipelines measuring up to 175 km, 77 offshore wells. In our development recommendations,
one can leverage both the existing and new to be built infrastructure. Most of these existing discoveries
were made by the NOC throughout the decades after the giant field Cantarell was discovered in the 1980's.
Extensive exploration was undertaken in the shallow waters of the Bay of Campeche with great success.

Challenges
Currently 54% of these discoveries remain in the "discovery/appraising" phase due to their small size and the
NOC's priority for managing larger declining giant fields. The other important party in overall development,
operations, and infrastructure is the federal agency responsible for regulating, evaluate, and oversee all
aspects of the Mexican oil industry (further known as the Regulator). Managing both the regulators above
ground challenges and subsurface challenges will need to be performed to successfully develop the assets
in the basin.
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Subsurface Challenges.
1. Challenges with reservoir compartmentalization due to presence of salt tectonics. Advances in seismic
interpretation and use of digital initiatives can aid in this.
2. H2S and blow outs from gas fields and mitigation of H2S in fields cam be adressed through advanced
flow assurance and high tolerance materials.
3. Over pressuring causes drilling hazards in these deeper reservoir targets.
4. The target reservoir depth is what most impacts costs even though the basin is primarily a shallow
water basin. The depth of the Mesozoic plays presents significant drilling costs.
5. Producing and processing heavy crude which is not mobile at reservoir conditions present additional
challenges for fluid mobility and flow assurance.
Above ground challenges.
1. The Regulator has approved an accelerated development plan for 15 of 20 fields included by the NOC
in its so-called fast-track effort to catalyze new production, which has lagged expectations. In August,
The Regulator assessed the NOC's performance for these 15 fields and reported that the NOC had
executed about 5% of approximately USD 2 billion in planned investment for 2019 and had drilled
only 1 of the 25 development wells planned for this year. Associated oil and gas production from the
fields is well below NOC's targets.
2. There are over 25 heavy oil fields (< 20 deg API, 1.35 Billion boe) which have been considered for
the development strategy however we factor in the challenges Mexico faces with lack of light oil or
diluent for heavy crude blending.
3. Local content rules (policy mandating that service and equipment companies be procured/sourced
from Mexican companies) for shallow water development are currently between 25-35%. This is
significantly higher compared to Deepwater development at only 4%. Such reliance on local suppliers
are aimed at fostering the local economy can be beneficial however the capacity of the local industry
to meet development demands are yet unknown.
4. Additionally, the cost reduction mechanisms modeled within rely on advances in technology which
may not be available at current local capacities.
Discovered volumes (2P MMboe) were plotted against the number of new field wild cat wells to determine
the lack of discoveries made in the basin after 2006, to further emphasize the commitment to develop current
assets. (Fig. 12)

Figure 5—Sureste Basin Discoveries vs. New Field Wild Cats

Development Strategy
The primary goal of the development strategies listed are to reduce overall cost considering all facilities
and capital expenditures.
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Cost reduction mechanisms used in asset modeling.

1. Hub and spoke strategic approach to field development to optimize platform capacity
2. Shorten tie-back distances to the wellhead platform. We modeled tie back to closer platform with
spare capacity.
3. Employ unmanned and standardized platform configurations. Reducing quarters, and presenting cost
savings through moving personell offshore.
4. Reduce non-productive rig time and optimizing rigs resulting in an overall need for less rigs and less
rig time.
5. Digitalization-enabled change in the operating model (predictive maintenance) could result in a
potential 60% reduction in offshore staffing due to relocation of maintenance crews onshore, and 30%
reduction in helicopter flights (removal of heli platforms) related to fewer maintenance and inspection
tasks needed to be performed.
Potential Technology modifications to reduce cost. To either lower cost or make NOC more competitive
with new foreign entrants, some technology modifications can be made to reduce costs.

• Remote surveillance of platforms thus reducing topside space (cost reduction).

• Centralized onshore operations center for optimization of manpower and monitoring.

• Unmanned platforms and autonomous/semi-autonomous monitoring.

Asset Screening
Heavy oil (33%) and lighter oil and gas (57%) comprises most remaining reserves in current discoveries in
the Sureste basin. The screening methodology for optimal field development is created using 2P Recoverable
Reserves Volumes, 2P Remaining Reserves Volumes, and Cumulative Produced Volumes (MMboe). (IHS
Markit IRIS21 Database 2019)
SPE-199010-MS 7

Figure 6—Asset Maturity Screening All Assets

Figure 7—Asset Maturity Screening (Target Size)

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Prospective Development Themes Based on Time. One can identify three development strategies for
production replacement:
1. Short term- Focused on monetizing smaller/marginal discoveries with proximity to platforms. We
have modeled field clusters which can add production within 6 months to 1 year of FID being taken in
2019-2020 as well as see a reduction in cost with technological advances such as modular standardized
platforms and unmanned platforms. Some of these technologies may not yet be available, though
prices were estimated.
2. Short to medium term- Focused on exploring and testing new plays within existing discoveries.
Most discoveries in the scope of this paper have identified reservoir in the Micoene play. The potential
for reserves uplift in targeting the Jurassic sub salt play. Since the Energy Reform opening, the basin's
vast network of data is also available for interpretation through the regulator.
3. Medium to longer term- The Sureste basin is now home to 15 international oil and gas operators
targeting different plays and exploring further from the shallow shelf into the "transition zone" water
depths. The ability to leverage these new build platforms and pipelines will be vital to keeping costs
low for full basin exploitation. Partnerships will be key to fully distribute risk amongst the companies
in a tough market.
After analyzing National Oil Company owned fields which are in the discovery and appraisal phase,
one can see the NOC plans to revitalize the shallow water of Sureste through investment in 13 additional
production platforms and 14 pipelines (175km) and 8 interconnections to existing platforms. With these
additional new built structures (increase in investment by 37.7%), we anticipate that the 42 remaining fields
in this basin will be able to be produced in the same manner leveraging this new infrastructure. This builds
on the NOC's strategy and is complementary to their strategy of seeing existing resource produced. When
screening the portfolio of assets for those which seemed most economically viable based on NPV, crude
quality, and CAPEX, one can determine the projects with negative NPV are also those which contain heavy
oil. (Fig 7)

Figure 8—Asset NPV, Gravity, Reserves Compared

SPE-199010-MS 9

Further analyzing the list of appraising and discovered fields, OPEX, finding & development, and capital
costs ($USD/boe) were calculated based on known current development plans from the NOC. Assets were
further narrowed down for screening, by choosing those with the lowest combination of all costs.

Figure 9—Cost in $/boe of different assets in different phases compared

After analyzing all fields based on current cost assumptions, short-term development plans, above ground
challenges, and subsurface challenges, three fields were chosen to be considered part of the development
plan case study analysis. The three fields were selected categorized by one being a light oil field, one being
a heavy oil field, and one being part of a many field complex with access to existing infrastructure.

Case Study 1 (Teca 1) – Light Oil Field

Teca 1 is a light oil field which currently modeled to tie in to future facilities (final investment decision 2024)
that is still currently being appraised. We propose that this asset be tied in to existing platforms of Cahua
A and Octil A which are 14.5 Km and 21 Km apart respectively. (Fig. 10) This would bring 52 MMbbls
of oil online in 2020 instead of 2024, which is the current FID date. We propose a wellhead and tieback
configuration to the newly installed Cahua-A platform. (Fig 11) This field is in 44 m of water which can
be considered more cost effective to setup infrastructure. Tetl is adjacent to a discovery, the Tacoalli field
(targets Lower Pliocene Cinco Presidents, which contains light oil and the Middle Pliocene Orca contains
heavy oil).
10 SPE-199010-MS

Figure 10—Location of Teca 1 with current pipelines (green) and proposed tieback to Cahua 1 (red)

Figure 11—Proposed Teca 1 Tieback

Case Study 2 (Ayatsil-Tekel-Utsil) - Heavy Oil

This field (Utsil) is in the Reforma Akal heavy oil fold belt and a part of the complicated Ayatsil-Tekel-Utsil
complex. It is considered phase three of the development project. The Utsil Field contains approximately
145 MMBoe in total recoverable remaining reserves with an API Gravity of 10. These heavy oil carbonate
fields in the Abaktun formation present a unique challenge. (Fig. 10) A well head and tie back system will
also be used in this model, yet adjustments for production of heavy oil will be made in the cost results. We
propose to tie this field to the Ku-Maloob-Zaap Complex approximately 4 km away.
Other Potential heavy oil field development concepts. Some of these concepts can include water flooding
with an addition of an electronic submersible pump as well as the use of low salinity waterflooding. Low
salinity waterflooding has been proven to provide 6-8% reservoir sweep uplift in heavy oil carbonates
(Nasralla 2018 and Bellentani 2016) such as those in the reservoirs of this field complex.
Licensing of internally developed EOR technologies is something seen previously as proprietry, yet now
companie's recovery technologies now being made available for commercial purposes. For example, with
the currently capital constrained oil and gas sector in Alberta, Canada (home to the largest heavy oil and oil
sands deposits in the world) it is not unlikely to fathom that some of those heavy oil recovery technologies
will be available for use to the greater industry as companies divest their Canadian heavy oil portfolios.
SPE-199010-MS 11

Heavy oil in Middle East fractured carbonate reservoirs account for 25-30% of the total oil in place in
the region. Production of heavy oil from such reservoirs is thought to play an important role in the future
of the ever-growing world's energy consumption in which Iran's recoverable heavy oil 2P is estimated to
be more than 85 billion barrels.
In the Offshore heavy oil sandstone fields of Brazil's Campos basin, an operator has mentioned its
intention to develop a polymer enhanced oil recovery (EOR) project at the Peregrino field post 2020.
Peregrino Phase 3 EOR contains parallels this analgous mexican field's EOR phase which would be the third
development phase of the project. The chemical injection technique is believed to have the potential to help
extract incremental volumes of the heavy – high viscosity oil present in the Peregrino sandstone reservoir
as the sweep efficiency would be improved. The partners are yet to launch a pilot polymer injection test, the
results of which are expected to be submitted by April 2019 to the Brazillian regulatory agency. We expect
that in case of positive results, polymer injection could start in the mid2020s, a few years after the start
of the second phase of the Peregrino development. The incremental production is expected to backfill the
available floating production storage and offloading (FPSO) ship capacity, driven by primary and secondary
production declines. Polymer injection is expected to be implemented in half of the water flooded target
area and to achieve 6% uplift.

Figure 12—Reforma Akal Belt Fields

Modeled Case Studies and Results

The two case studies of light and heavy oil were compared to determine if asset screening was effective as
well as if any significant cost reduction was achieved.
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Table 1—Results of Case Studies Compared

Concept Case #1 (light) Teca 1 Case #2 (heavy) Utsil

Proposed Tie back distance (km) 14 4

Approximate

Water depth (m) 44 127

Oil gravity (API) 32 10

Current Development Plan Estimated Cost by 150 508

NOC ($MM USD)

Proposed Development Plan Cost ($MM 142.8 502.3

USD)

Cost reduction ($MM USD) 8.8 6.3

Final Remarks
The future of the sureste basin is considered bright with an extensive amount of proven 2P remaining
recoverable reserves to be produced in the future. The proximity to the U.S. Gulf of Mexico remains an
advantage for the country of Mexico's undeveloped and underdeveloped assets. Through collaboration with
local and foregin content providers, cost saving measures, and new technologies, a resurgence of Mexican
oil production is possible. The opportunities presented in the Sureste Basin should be embraced and further
be researched to understand cost saving possibilities related to topside design, infrastructure efficiency, and
tieback length. Fields that contain primarily light oil seem to be the most promising for the operator seeking
the smallest capital expenditure, shortest time to market, and larger profit. Reducing Tie back distance has
seen a small approximately 8.8 $MMUSD reduction in cost for an asset like Teca 1. For an asset like Utsil,
utilizing a shorter tieback and elimination of some crew quarters has also resulted in some approximate cost
reduction of approximately 6.3 $MMUSD.

Acknowledgements
The Authors wish to express their gratitude and their support for their employer, IHS Markit for allowing
them to partake in research on the Sureste Basin and providing the necessary data to develop the research
models. A special thanks to the colleagues and mentors that provided their important feedback, support,
and encouragement throughout the research process.

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