Pemex’s new Dzimpona field: hype or hope?

As Mexican NOC Pemex prepares the official announcement of a major oilfield discovery, experts are highly skeptical that the firm will be able to develop a credible plan to take advantage of the new resources even if they are confirmed.

President Andrés Manuel López Obrador broke news earlier this week that the company had made a “very big” onshore discovery in Tabasco state and that more details would be shared on Thursday, March 18. 

That date is an important landmark in the president’s nationalistic platform as it is the day on which Mexico nationalized its oil industry and created Pemex in 1938.

According to numerous press reports, the discovery, called Dzimpona, is the largest that NOC has made in recent memory, dwarfing Ixachi, which at the time of its discovery was the most significant the company had made in over a decade.

However, experts consulted by BNamericas agreed that the announcement was more of a publicity stunt than a true discovery and many steps would have to be taken by Pemex to certify it had found commercially exploitable resources.

“This [announcement] really shows how protocols have become blurred,” Eduardo Prud’homme, a consultant and former regulator at natural gas control center Cenagas and energy regulatory commission CRE, told BNamericas.

“It’s something that, in order to give it some validity, would have to be reported to the [hydrocarbons regulator] CNH to be validated. As a company they can announce it, but the CNH exists to validate the replenishment of hydrocarbon reserves,” he said.

David Shields, a private consultant specializing in the Mexican energy sector, agreed that little was known about Dzimpona and it was likely that the firm would need to drill additional wells to determine its size and potential. He also added that Pemex has a history of making exaggerated announcements about fields that ultimately do not pan out as hoped.

“It is the third ‘giant’ field to be announced by Pemex in this administration, the others being Ixachi and Quesqui. There’s little information on their development and, so far, none are providing any significant production,” Shields told BNamericas.

The trend goes beyond the current administration, as over the past 15 years Pemex has announced fields, such as Noxal and Lankahuasa, deemed to be among the largest in the world, that later “turned out to be non-existent or unprofitable for development,” Shields said.

According to Prud’homme, the fact that the government’s big political play in the energy sector, its reform of the electric power law, was suspended by federal courts last week, may have led it to play up the discovery in the media.

“The recent media appearances of Pemex’s director [Octavio Romero Oropeza]… suggest an attempt to fill up media space with what was done wrong by previous administrations and contrast it with what’s being done right, and proof of that contrast is that Pemex found a new field that’s very promising. It is a political issue that we must look at with reservations,” Prud’homme said.

He added that, while the field’s potential cannot be dismissed, Pemex must follow the existing regulations and provide the appropriate information to the CNH before drafting a full development plan.

WHERE IS PEMEX’S EXPLORATORY ACTIVITY LACKING?

Asked why Pemex's exploration and production arm PEP has had a hard time matching the major discoveries of the company’s past, Prud’homme pointed to the fact the NOC's budget for exploration and production is limited and faces hurdles due to being part of Mexico’s broader federal budget discussions.

“It’s difficult to evaluate Pemex’s situation when it doesn’t have the same cash flow conditions [as other industry players] on a per-project basis. On the macro level, we know about its dire finances, but we would need to analyze the success of a given field on the basis of the capital flows and financial resources dedicated to that field,” he said.

However, he added, aside from the amount of capital it has access to, it is also important that it cannot access resources with the same speed and timing as other players. “There, Pemex will always have a disadvantage and it will be difficult to evaluate its success as a project developer given the restrictions it is always affected by.”

Shields made a similar diagnosis, arguing that Pemex’s narrow exploration budget was limiting the company’s options. “It potentially could have a much bigger and more successful exploration program if it were to make use of the farmout options foreseen in law,” he said, something the current administration has said it has no plans to do.

Dzimpona has been reported to contain 600Mboe (million barrels of oil equivalent) of total reserves, according to Pemex. Ixachi, at the time of its discovery, was estimated by the NOC to hold 350Mboe. For comparison, Zama, the largest private discovery in Mexico, is estimated to contain up to 2Bboe.