Five-Year Plan for Exploration and Production, 2020-2024
On October 28th, the Ministry of Energy (SENER) published the second five-year plan for E&P bidding processes (PQ-2020) according to Hydrocarbons Law. The first one was published in 2015 with four subsequent annual updates from 2016 to 2019.
At the beginning of his administration, president López Obrador announced the suspension of future bidding rounds and the publication of this document raises suspicions about a possible policy change. However, this publication could be the outcome of a legal requirement. Either way, it is interesting to have a look at the evolution of this document as it is a complete new one under AMLO’s government.
The main differences between the new plan and the 2019 edition (PQ-2019), are the absence of unconventional areas and the increase in offshore potential:
Unconventional (shale) areas are not included in PQ-2020, according to presidential banning. The PQ-2019 included 187 blocks and 53,969 km2 of bidding surface for unconventional areas.
The large reserves of Chicontepec were also excluded from the new plan probably because its economic feasibility depends on the higher materiality from deeper unconventional formations.
The banning of unconventional and no including Chicontepec explain the major drop in onshore of 228 blocks and 63,000 km2 from PQ-2019 to PQ-2020.
Surprisingly, concerning PQ-2019, the new plan has a larger offshore acreage in fewer blocks, for both shallow and deep water. Therefore, considering the average block*, there is an increase of 138% in deep-water block size (2,320 km2 in 2020 vs 973 km2 in 2019) and 26% in shallow-water block size (505 km2 in 2020 vs 401 km2 in 2019).
In the same way, PQ-2020 has an important increase in prospective resources for the average block* of 257% for deep-water (190.5 mmboe in 2020 vs 53.4 mmboe in 2019) and 44% for shallow water (43.9 mmboe in 2020 vs 30.4 mmboe in 2019).
PQ-2020 CONCLUDING REMARKS
- This five-year plan brings new hopes about reactivating bidding rounds in the future, based on the fact that SENER actually worked on a new proposal increasing block size and resources per block for offshore areas.
- Furthermore, it recognizes that new rounds are suspended and that relaunching them is conditioned to private operators’ cooperation for achieving national energy objectives.
- It also provies better data quality produced by 2,820 million of USD invested in ARES activities (since 2015).
- As the government has stated, it is necessary that E&P contracts show the benefit from their operations. PQ-2020 indicates that SENER will annually evaluate their tangible benefits, thus it is key to focusing on production, reserves incorporation, exploratory activity, and investments.
- For the first time, PQ-2020 includes a production forecast with low and high scenarios. Unfortunately, expected production from private operators is only revealed in the low-case scenario and the high-case one is aggregated with Pemex production. Thus, there is no way to know how private operators would behave under favorable conditions.
- Nevertheless, is good to know that “under non-favorable conditions”, private operators would increase production by 260,000 barrels per day by 2024.
EVOLUTION OF THE FIVE-YEAR PLAN
Surface (thousand km2)
Prospective Resources (mmmboe)
Production forecast (mbd)
Five-year plan 2020-2024