Contingent Resources

Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects but which are not currently considered to be commercially recoverable owing to one or more contingencies.
Under the Regulation on Prospective and Contingent Resources^5/ issued by the National Hydrocarbons Commission (CNH), it tracks the country’s Hydrocarbon Resources from their evaluation and quantification as Prospective Resources to their incorporation as Reserves. During 2022, there is a record of 41 drilled exploration prospects, whose total mean Prospective Resources estimate was 2,367 MMboe, from which 22 new discoveries were made that incorporated 84 MMboe of new 3C Contingent Resources and 359 MMboe of 3P Reserves.
On the other hand by 2023, the volume of 3C Contingent Resources was reduced by almost a third compared to 2022. This because 72% of the volume of 3C Contingent Resources associated with 22 fields was reclassified as 3P Reserves.
In balance for 2023, 9.1% of the 3P Reserves (2,093 MMboe) were incorporated from new discoveries (1.6%) and by the reclassification of Contingent Resources to Reserves (7.5%), which is equivalent to reincorporate Reserves for the double of the total production reported in 2022.

PRMS Contingent Resources Classification

For the exercise of CNH duties regarding the classification of Contingent Resources estimates, the Petroleum Resources Management System (PRMS) is adopted, in
its current English version, as the reference system.
This classification system defines subclasses for Contingent Resources, which are related to the maturity level of the projects and the business decisions to be
implemented, positioning the project's status in the value chain.
Development pending: A discovered accumulation where project activities are ongoing to justify commercial development in the foreseeable future.
Development on hold: A discovered accumulation where project activities are on hold and where justification as a commercial development may be subject
to significant delay.
Development unclarified: A discovered accumulation where project activities are under evaluation and where justification as a commercial development is unknown
based on available information.
Development not viable: A discovered accumulation for which there are no current plans to develop or to acquire additional data at the time because of
limited commercial potential.

The Comisión Nacional de Hidrocarburos (CNH) has as two of its strategic objectives to ensure the continuous improvement of the regulation on exploration and extraction of hydrocarbons, as well as to ensure efficient and quality service to regulated entities.

Based on these objectives, the CNH is developing a transversal modification project in the Regulations based on the following strategic points:

• Plan evaluation criteria
• Operations flexibility
• Elimination of duplicities
• Supervision efficiency

The main effects and benefits of the transversal changes in the Regulations will be reflected in:

• Plan Guidelines- $1,500 millions
• Well Guidelines - $ 1,060 millions
• Gas use Guidelines - $110 millions
• Measurement Guidelines - $610 millions
• Enhanced Recovery Guidelines - $130 millions
• Reserves Guidelines

Generating total savings with compliance with the regulation of $3,400 million.

To give way to this change in the Regulations, the Regulatory Impact Analysis and Start of the Regulatory Improvement process is sent to the Comisión Nacional de Mejora Regulatoria, later the comments that are issued during the Public Consultation process are received and attended to, and once the final Opinion of the Comisión Nacional de Mejora Regulatoria is obtained, the Agreement will be submitted to the Governing Body so that, once approved by it, it is sent to the Official Journal of the Federation for publication.

In the period between January and June 2023, the National Hydrocarbons Commission (CNH by its Spanish acronym) approved 28^/2 Extraction Development Plans, 10 of which feature the highest investment amounts and estimated operating expenses, which in whole amount to US$ 75.55 billion, distributed in six Entitlements, with US$ 51.88 billion (69%), three Contracts, with US$ 14.59 billion (19%) and a particular case corresponding to the Zama field (unitized area), with US$ 9.09 billion (12%).

In the oil industry, an Oil field consists of one or several reservoirs, grouped or related according to geostructural aspects and stratigraphic conditions that are studied and developed with the aim of achieving hydrocarbons production¹. Between 2019 and May 2023, 35 fields were counted in Mexico with new production of liquids; which can be classified into the following 3 categories: Priority Fields, New PEMEX´s Fields, and Fields in Contracts.

The Priority Fields² of Petróleos Mexicanos (PEMEX) are a set of fields developed with the purpose of contributing to the national production of hydrocarbons; to the date, the National Hydrocarbons Commission (CNH, by its Spanish acronym) has approved a total of 17 Development Plans and 7 modifications, related to these projects. Moreover, from 2019 to May 2023, PEMEX has incorporated 13 New Fields³ to the national production of hydrocarbons; of which, Tekel and Tlalkivak have begun to report production volumes during the current year. Meanwhile, 5 Fields in Contracts⁴ stand out for their production contribution: Amoca and Mizton fields (CNH-R01-L02-A1/2015 Operated by Eni Mexico), Hokchi field (CNH-R01-L02-A2/2015 Operated by Hokchi Energy), and Pokoch and Ichalkil fields (CNH-R01-L02-A4/2015 Operated by Fieldwood Energy E&P México).

To May 2023, the production of liquids in these projects amounts to 639 thousand barrels per day (kbpd), which are 208 kbpd more than the reported as of May 2022 (431 kbpd). Among the Priority Fields with the highest production of liquids stand out Ixachi, Mulach, and Cheek with 39, 25, and 19 kbpd, respectively. While for the New Fields stand out Quesqui, Tupilco Profundo and Pokché with 203, 115, and 33 kbpd, respectively. As for the Contracts, the Hokchi, Amoca, Miztón, Pokoch and Ichalkil fields report production of liquids of 23, 19, 16, 7, and 5 kbpd, respectively.

Current Exploration and Production Contracts^/3

An oil and gas Contract is a legal instrument whereby the State grants rights to one or several companies to perform hydrocarbon exploration and/or extraction activities in a Contractual Area for a specific duration.

During the Bidding Rounds, 112 Exploration and Extraction Contracts were awarded. 108 Contracts are valid to date, 34 of which belong to Round 1, 50 to Round 2 and 16 to Round 3, in addition to 3 Farmouts and 5 Migrations (74 Contracts are under the License Model and 34 are under the Production Sharing Model).

Current License Contracts

There are 74 current License Contracts, distributed in 26 Deepwater and 48 Onshore Contracts (including the M5 - Miquetla Migration and 3 PEMEX Farmouts).
In accordance with Article 6 of the Hydrocarbons Revenue Law, License Contracts will establish the following Considerations, which must be paid to the Mexican State by the Contractor:
- Contractual Fee for the Exploration Phase
- Base Royalty
- Additional Royalty
- Signing Bonus

And, if applicable, the following taxes:
- Income tax
- Tax on Hydrocarbon Exploration and Production Activities (IAEEH, by the initials in Spanish)

Current Production Sharing Contracts

Regarding Production Sharing Contracts, 34 Contracts are current, and are distributed in 3 Onshore Contracts (including the PEMEX
Migrations M2-Santuario-El Golpe, M3-Misión, and M4-Ébano) and 31 Shallow Water Contracts (including M1-Ek-Balam, the Migration
without partner of PEMEX).
In accordance with Article 12 of the Hydrocarbons Revenue Law, under this Contract modality, Considerations will be paid in kind with a proportion of the Contractual Hydrocarbon Production that is equivalent to the value of those Considerations:
- Contractual Fee for the Exploration Phase
- Base Royalty
- State Share in Operating Profit
And. if applicable, the following taxes:
- Income tax
- IAEEH

In the oil industry, a Field consists of one or several reservoirs, grouped or related according to geostructural aspects and stratigraphic conditions that are studied and developed with the aim of achieving hydrocarbons production¹. Between 2019 and December 2022, 33 fields were counted in Mexico with new production of liquids; which can be classified into the following 3 categories: Priority Fields, New PEMEX´s Fields, and Fields in Contracts.

The Priority Fields² of Petróleos Mexicanos (PEMEX) are a set of fields developed with the purpose of contributing to the national production of hydrocarbons; to the date, the National Hydrocarbons Commission (CNH) has approved a total of 17 Development Plans, and their modifications, related to these projects. Moreover, from 2019 to December 2022, PEMEX has incorporated 11 New Fields³ to the national production of hydrocarbons. Meanwhile, 5 Fields in Contracts⁴ started production: Amoca and Mizton fields (CNH-R01-L02-A1/2015 Operated by Eni Mexico), Hokchi field (CNH-R01-L02-A2/2015 Operated by Hokchi Energy), and Pokoch and Ichalkil fields (CNH-R01-L02-A4/2015 Operated by Fieldwood Energy E&P México).

To December 2022, the production of liquids in these projects amounts to 532 thousand barrels per day (kbpd), which are 203 kbpd more than the reported as of December 2021 (329 kbpd). Among the Priority Fields with the highest production of liquids stand out Ixachi, Mulach, and Koban with 37, 26, and 22 kbpd, respectively. While for the New Fields stand out Quesqui, Tupilco Profundo and Pokché with 170, 68, and 31 kbpd, respectively. As for the Contracts, the Hokchi, Miztón, Pokoch, Amoca, and Ichalkil fields report production of liquids of 27, 12, 11, 8, and 6 kbpd, respectively.

Contingent Resources
Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations by application of development projects but which are not currently considered to be commercially recoverable owing to one or more contingencies.

Compared to Prospective Resources, Contingent Resources are already discovered, whose recoverable fractions are not commercial due to one or more contingencies; in other words, for some reason those discovered and recoverable volumes are not economically profitable or technically viable for development. On the other hand, Reserves are discovered resources that are anticipated to be commercially recoverable by the application of development projects. Regarding the oil equivalent Reserves amount, 3C Contingent Resources represent 39% of 3P Reserves as of January 1st, 2022.

Under the applicable Regulation on Prospective and Contingent Resources issued by the National Hydrocarbons Commission (CNH), Oil Companies annually report their estimates of Contingent Resources of fields or discoveries within the areas where they are Operators^5/. Based on the information reported by the Oil Companies and reviewed by CNH, according to the assessment and state of fields and discoveries as of 2021, for the first time, the Contingent Resources of the country are consolidated for the purpose of providing a complete vision of the Petroleum Potential of Mexico.

PRMS Contingent Resources Classification
For the exercise of CNH duties regarding the classification of Contingent Resources estimates, the Petroleum Resources Management System (PRMS) is adopted, in its current English version, as the reference system.

This classification system defines subclasses for Contingent Resources, which are related to the maturity level of the projects and the business decisions to be implemented, positioning the project's status in the value chain.

Development pending: A discovered accumulation where project activities are ongoing to justify commercial development in the foreseeable future.

Development on hold: A discovered accumulation where project activities are on hold and where justification as a commercial development may be subject to significant delay.

Development unclarified: A discovered accumulation where project activities are under evaluation and where justification as a commercial development is unknown based on available information.

CNIH Information Access & ARES/²

As of September 2022, a total amount of US$ 5.45 billion has been invested, of which US$ 5.13 billion came from Reconnaissance and Surface Exploration Authorizations (ARES, by its acronyms in Spanish) and US$ 320 million from revenues for the National Hydrocarbons Information Center (CNIH, by its acronyms in Spanish) information access and usage.

Regarding ARES activities, approximately 94% of the historical investments have been mainly carried out in the following years: 2015 (49%), 2018 (27%), 2021 (9%) and 2016 (9%).

Contract Activities/³

From 2015 to September 2022, a total investment of US$ 11.95 billion has been registered in petroleum related activities under contracts for: Exploration (22%), Appraisal (13%), Development (44%), Production (20%) and Abandonment (1%).

From 2018 to date, the largest proportion of reported investment is associated with the Petroleum Development Activity, mainly due to the start of production of Round 1.2 Contracts.

Payments to MOF + THEPA/⁴

As of September 2022, through the Mexican Oil Fund (MOF), the State has received an accumulated income of US$ 7.03 billion as payments from Hydrocarbons Exploration and Extraction Contracts; where approximately 66% are associated to the payment linked to the Operating Profit (State’s share of OP) applicable under  Production Sharing Contracts.

CNIH Information Access & ARES/²

As of June 2022, a total amount of US$ 5.50 billion has been invested, of which US$ 5.18 billion came from Reconnaissance and Surface Exploration Authorizations (ARES, by its acronyms in Spanish) and US$ 320 million from revenues for the National Hydrocarbons Information Center (CNIH, by its acronyms in Spanish) information access and usage.

Regarding ARES activities, approximately 94% of the historical investments have been mainly carried out in the following years: 2015 (49%), 2018 (27%), 2021 (9%) and 2016 (9%).

Contract Activities/³

From 2015 to June 2022, a total investment of US$ 10.81 billion has been registered in petroleum related activities under contracts for: Exploration (22%), Appraisal (13%), Development (43%), Production (21%) and Abandonment (1%).

From 2018 to date, the largest proportion of reported investment is associated with the Petroleum Development Activity, mainly due to the start of production of Round 1.2 Contracts.

Payments to MOF + THEPA/⁴

As of June 2022, the State has received an accumulated income of US$ 6.21 billion as payments from Hydrocarbons Exploration and Extraction Contracts; approximately 63% are associated to the payment linked to the Operating Profit (State’s share of OP) applicable under  Production Sharing Contracts.

In the oil industry, a Field consists of one or several reservoirs, grouped or related according to geostructural aspects and stratigraphic conditions that are studied and developed with the aim of achieving hydrocarbons production¹. Between 2019 and May 2022, 32 fields were counted in Mexico with new production of liquids; which can be classified into the following 3 categories: Priority Fields, New PEMEX´s Fields, and Fields in Contracts.​

The Priority Fields² of Petróleos Mexicanos (PEMEX) are a set of fields developed with the purpose of contributing to the national production of hydrocarbons; to the date, the National Hydrocarbons Commission (CNH) has approved a total of 17 Development Plans, and their modifications, related to these projects. Moreover, from 2019 to May 2022, PEMEX has incorporated 10 New Fields³ to the national production of hydrocarbons. Meanwhile, 5 Fields in Contracts⁴ started production: Amoca and Mizton fields (CNH-R01-L02-A1/2015 Operated by Eni Mexico), Hokchi field (CNH-R01-L02-A2/2015 Operated by Hokchi Energy), and Pokoch and Ichalkil fields (CNH-R01-L02-A4/2015 Operated by Fieldwood Energy E&P México).​

To May 2022, the production of liquids in these projects amounts to 431 thousand barrels per day (kbpd), 222 kbpd and 103 kbpd more that of May 2021 (209 Kbpd) and that of December 2021 (329 kbpd), correspondingly. Among the Priority Fields with the highest production of liquids stand out Ixachi, Mulach, and Cheek with 33, 28, and 20 kbpd, respectively. While for the New Fields stand out Quesqui, Pokche, and Itta with 134, 24, and 22 kbpd, respectively. As for the Contracts, the Hokchi, Miztón, Pokoch, Ichalkil, and Amoca fields report production of liquids of 22, 14, 13, 10, and 5 kbpd, respectively.

In the oil industry, a Field consists of one or several reservoirs, grouped or related according to geostructural aspects and stratigraphic conditions that are studied and developed with the aim of achieving hydrocarbons production. Between 2019 and 2021, 28 fields were counted in Mexico with new production of liquids; which can be classified into the following 3 categories: Priority Fields, New PEMEX´s Fields and Fields in Contracts.

The Priority Fields of Petróleos Mexicanos (PEMEX) are a set of fields developed with the purpose of contributing to the national production of hydrocarbons; to the date, the National Hydrocarbons Commission (CNH) has approved a total of 17 Development Plans, and their modifications, related to these projects. Moreover, from 2019 to 2021, PEMEX has incorporated 9 New Fields to the national production of hydrocarbons. Meanwhile, 4 Fields in Contracts started production: Mizton field (CNH-R01-L02-A1/2015 operated by Eni Mexico), Hokchi field (CNH-R01-L02-A2/2015 by Hokchi Energy) and Pokoch and Ichalkil fields (CNH-R01-L02-A4/2015 by Fieldwood Energy E&P México).

To December 2021, the production of liquids in these projects amounts to 319 thousand barrels per day (kbpd), almost doubling that of December 2020 (164 kbpd). Among the Priority Fields with the highest production of liquids stand out Ixachi, Mulach and Octli with 31, 26 and 21 kbpd, respectively. While for the New Fields stand out Quesqui, Itta and Tlamatini with 77, 16 and 14 kbpd, respectively. As for the Contracts, the Hokchi, Miztón, Pokoch and Ichalkil fields report production of liquids of 18, 13, 4 and 2 kbpd, respectively.

The Well Drilling Guidelines^/1 define deepwater wells as those with a water depth equal to or greater than 500 meters, while ultra deepwater wells are those measuring 1,500 meters or more.

Based on the Exploration Plans presented by Operators and approved by the National Hydrocarbons Commission (CNH), 5 prospects in Entitlement areas are scheduled to be drilled in deepwater or ultra deepwater with drilling investments of approximately US$368.6 million. In Contractual areas, 13 wells are scheduled, with drilling investments of nearly US$933.7 million.^/2

During the present year, the scheduled drilling of Bacalar-1EXP well is especially notable, activity for which PC Carigali^/3 received authorization during the 52nd Extraordinary Session of the Board of Commissioners, held on July 27, 2021. This prospect will be drilled in ultra deepwater in the Mexican Ridges basin in the Gulf of Mexico, in a water depth of 1,532 meters, for a total programmed depth of 3,620 meters^/4. Its geological objective is the Middle and Upper Miocene with prospective resources estimated at 759 million barrels of crude oil equivalent and planned investments of US$60.9 million.

For further information about well authorizations, please visit the portal:  https://cnh.gob.mx/registro-publico/pozos/.

The Hydrocarbons Production Prospective is a forecast created by the National Hydrocarbons Commission (CNH) based on the expected production of hydrocarbons in Entitlement and Contract areas¹ in Mexico.

The forecast is developed using information reported by operators to the CNH, as well as from observed trends in the industry and in national exploration potential. During the report’s creation, possible scenarios are outlined using premises and assumptions for the exploration and production activities of oil & gas projects, as described in the report.

This update of the Prospective estimates an increase of ~150 kbpd in the high scenario, mainly due to predicted production from Contract areas tendered in Round 1.2, the Ek-Balam project and new Pemex Exploration Entitlements².

For further information, please consult the quarterly update of the report on the website hidrocarburos.gob.mx, under the section Statistics / Production / Reports / Production Prospective. 

In 2020, natural gas production from contract areas reached 240 million cubic feet per day (MMcfpd). This volume represents 6% of national production – 3.843 billion cubic feet per day in 2020 –  and shows an increase of 16% relative to natural gas production in 2019.

This production originated from 40 contract areas, in particular from: CNH-M3-MISION/2018 (113 MMcfpd), CNH-A4.OGARRIO/2018 (19 MMcfpd) and CNH-R01-L02-A1/2015 (15 MMcfpd).

In addition, two contract areas began commercial production during 2020: CNH-R01-L02-A2/2015, operated by Hokchi Energy and CNH-R02-L03-VC-01/2018, operated by Bloque VC 01.

For more information, please visit the Hydrocarbons Information System (sih.hidrocarburos.gob.mx/)

The Centro Nacional de Información de Hidrocarburos (CNIH) is the area within the CNH responsible for compiling, gathering, safeguarding, managing, utilizing, analyzing, updating and publishing the information and statistics related to reconnaissance and surface exploration, as well as the information regarding the exploration and extraction of hydrocarbons.

In compliance with its mandate, the CNIH presents the most notable information on the Mexican hydrocarbon industry, comparable with the information published by other international statistical information systems.

The following table shows the main petroleum statistics available around the world.

During the 33th Extraordinary Session of 2020, the CNH approved the resolution that compiles and publishes the official 1P, 2P, and 3P hydrocarbons’ reserves as of January 1st, 2020. The reserves volumes in fields operated under the contractual regime amount to: 1.065 billion barrels of oil equivalent (Bboe) in 1P reserves, 2.302 Bboe in 2P reserves, and 2.930 Bboe in 3P reserves.

2P reserves in these fields increased by 32% with respect to the last certification period, increasing from 1.747 to 2.302 Bboe.

This increase is due to positive estimates of reserves in the following contracts: CNH-R01-L02-A4/2015 (Ichalkil-Pokoch fields), CNH-R01-L03-A1/2015 (Barcodon field), CNH-R01-L03-A5/2015 (Carretas field), CNH-R01-L03-A6/2015 (Catedral field), CNH-R01-L03-A7/2015 (Cuichapa-Poniente field), CNH-R01-L03-A18/2015 (Peña Blanca field) and CNH-R01-L03-A21/2016 (San Bernardo field); all these contracts documented reserves for the first time in 2020.

For more information, visit the Sistema de Información de Hidrocarburos (https://sih.hidrocarburos.gob.mx/), under the section “Recursos y Reservas”.

From 2015 to 2019, 41 hydrocarbons’ discoveries were reported from the drilling of 112 exploratory wells¹, representing one discovery for every three wells drilled.

Exploratory wells² are direct methods used in exploration activities to identify, discover and appraise hydrocarbons in the subsurface.

Discoveries² are accumulations of hydrocarbons in the subsurface that, via drilling activities, have been shown to contain hydrocarbons’ volumes.

During this period, a total of 112 exploratory wells were drilled in Mexico; 101 in Entitlement areas and 11 in contractual areas. 28 of these wells were onshore, 55 shallow water, and 29 deepwater wells.

There have been 41 discoveries³ reported in Mexico since 2015; 37 in Entitlement areas and 4 in contractual areas; of which 10 correspond to discoveries made in onshore areas, 26 in shallow waters and 5 in deepwater.

From 2015 to 2019, the State received an income of MXN$6,926 million pesos in surface payments from 112 oil and gas contracts. ¹

MXN$2,838 million pesos correspond to payments of the Contractual Fee for the Exploration Phase, a fee that is paid monthly and is calculated based on the block surface area of contracts not yet in the production phase. The Mexican Oil Fund for Stabilization and Development is the recipient of these fee payments.²

MXN$4,088 million pesos correspond to payments of the Tax on Exploration and Production Activities, paid monthly and calculated based on block surface area of contracts in the exploration and production phases. The Mexican Tax Authority (SAT) is the recipient of these tax payments.³

It is projected that the annual income from these fees and taxes will reach MXN$3,765 million pesos in 2020 and a total income of MXN$18,929 million pesos during the period 2021-2024.

In 2019, production from contracts reached annual average production levels of  84.4 thousand barrels per day (mbbl/d).

This annual average represents a 48% increase with regards to annual average production in 2018.

During the month of December 2019, production from contracts reached 103 mbbl/d, comprised of the following:

• 74.8 mbbl/d produced in Pemex contract migration areas,
• 16.7 mbbl/d produced in contractual areas tendered in bidding rounds and
• 11.4 mbbl/d produced in Pemex farm out areas.

For more information, please visit the Hydrocarbons’ Information System (https://sih.hidrocarburos.gob.mx/), in the section “Production”, subsection “Production per Contract”.

In exploration and development plans approved by the Comisión Nacional de Hidrocarburos, 470 wells are projected to be drilled by operators during the period 2020-2024.

59 of these wells (13%) are exploratory, committed to by operators in plans approved by the CNH. Areas tendered in Bidding Round 2 stand out, with a total of 44 wells to be drilled.

411 (87%) of these wells are production wells that operators have committed to in approved development plans. Particularly notable are the 318 projected wells from Pemex contract migration areas, 225 of which will be drilled in the Ébano Field contractual area.

For more information, please visit the Rondas México portal, under the tab “Relevant Statistics” (https://rondasmexico.gob.mx/eng/relevant-figures/?tab=03).

The State’s revenue from consideration of oil contracts reached a total amount of $1.113 billion in the last 5 years.^/1

In the January-August period of 2019, revenues to the State represented $ 424.5 million dollars. At the end of this year, the amount is expected to exceed 2018’s revenue, which stood at $ 505.3 million.

In addition to the income from contractual considerations, the State raised $ 859.5 million dollars in 2017, and 2018 for signing bonus’ tie-breakers in tenders.

For further information, visit the Statistics’ Portal of the National Hydrocarbons Center (https://hidrocarburos.gob.mx/statistics/) under the section “Investments”, ”Reports”, “Hydrocarbons Payments"

Oil contracts generate payments to the State through:

1. Considerations from Production Sharing Contracts: Base Royalty, Contractual Fee for the Exploration Phase and the State’s Share in Operating Profit^/3.
2. Considerations from License Agreements: Base Royalty, Contractual Fee for the Exploration Phase, Additional Royalty and, if applicable, Signing Bonuses’ for tie-breakers.

During the 13th Ordinary Session of the Board of Commissioners on November 13, 2019, the National Hydrocarbons Commission authorized the drilling of exploratory well Chibu-1EXP in ultra deepwaters, by operator Shell Exploración y Extracción de México.¹

• This is the first exploratory well to be drilled in ultra deepwaters in the Saline Basin located in the Gulf of Mexico. Total programmed depth is estimated at 6,731 meters².
• The well is drilled as part of a deepwater contract in the Gulf of Mexico³ signed in May 2018 with contractor Shell Exploración y Extracción de México S.A. de C.V.
• In total, prospective resources are estimated at 219 million barrels of crude oil equivalent, across two geological objectives located in the Oligocene and the Upper Oxfordian Jurassic.
• The drilling timeline is estimated at 85 days, with activities starting on December 5, 2019, and finishing on February 28, 2020.
• Investment is estimated at US$93.3 million (MXN$1.810 billion pesos⁴), in terms of well drilling and finishing.
• For more information regarding wells, sorted by operator and location, visit the portals: https://sih.hidrocarburos.gob.mx/ and https://cnh.gob.mx/registro-publico/pozos/.

During the 12th Ordinary Session of the Board of Commissioners on October 22, 2019, the National Hydrocarbons Commission approved technical documents regarding estimating national prospective resources.¹

In total, national prospective resources are estimated at 112.9 billion barrels of crude oil equivalent (BBOE), of which:

• 48.7 BBOE (43% of total) are located in conventional plays². This represents a 7.4% reduction in volume with regards to last year’s estimates. The reduction in estimated volume in this category is due to the updating of estimated resources in the Deep Gulf of Mexico province, using new exploration information and results from recently drilled wells.
• 64.2 BBOE (57% of total) are located in unconventional plays. This figure represents a 6.6% increase in volume with regards to 2018’s estimate, due to the incorporation of resources located in the Oxfordian Upper Jurassic play of the Tampico-Misantla basin.

The oil province with the largest volumes of prospective resources in Mexico is the Tampico-Misantla basin, with 41.3 billion barrels of crude oil equivalent. This province is located across the states of San Luis Potosí, Tamaulipas and Veracruz.

For more information, access the report “Prospective Resources”, available at https://hidrocarburos.gob.mx/estadísticas/, in the section “Reserves and Resources”.

This week the National Hydrocarbons Commission approved Exploration Plans for entitlements AE-0133-Cuichapa and AE-0155-Chalabil. These approved plans bring the total to 5 authorized Pemex projects¹ for exploration in the period 2020-2023, of a total of 64 under evaluation.

• According to information presented in the 5 approved plans, total investments and operating expenses are estimated at US$356 million dollars in a baseline scenario, and at US$532 million dollars in an improved scenario, for a total de US$888 million dollars.
• Investments considered in the Plans include, among others, the drilling of 27 exploratory wells: 8 in the baseline scenario and 19 additional wells in an improved scenario.
• The estimated total incorporation of prospective reserves for the 5 plans is 445 MMboe in a baseline scenario and 796 MMboe in an improved scenario, for a total of 1.241 BBOE (not considering risk).
• Taking into account the probability of geological success in the exploratory prospects, an estimated volume of 375 MMboe resources could be incorporated, considering both scenarios.
• For more information, visit the new report on Pemex exploration entitlements at https://hidrocarburos.gob.mx/statistics/

• To date, of the 111 currently valid E&P contracts, 10 have approved Development Plans¹ that include information about expected volumes of hydrocarbons production.
• Over the next 5 years (2020 to 2024), a total production of 501 million barrels of oil and 637 billion cubic feet of gas are expected to be generated by these projects.
• According to Plans presented by contractors, a maximum oil production of 334 thousand barrels per day by year 2025 is expected, of which 129 tb/d originate from projects where Pemex is a partner².
• Projects with the largest expected volumes of oil are from contracts CNH-R01-L02-A4/2015 (453 million barrels) operated by Fieldwood, CNH-M1-Ek-Balam/2017 (440 million barrels) operated by Pemex and CNH-R01-L02-A1/2015 (338 million barrels) operated by ENI, which together represent 77% of total expected production. These projects are located in shallow waters of the coast of Tabasco and Campeche states.
• A maximum production of gas is estimated at 307 million cubic feet per day by 2025, of which 108 million cf/d will come from projects where Pemex is a partner.
• Projects with the largest expected volumes of gas are from contracts CNH-R01-L02-A4/2015 (563 billion cubic feet) operated by Fieldwood, CNH-R01-L02-A1/2015 (219 billion cubic feet) operated by ENI and CNH-M3-Misión/2018 (218 billion cubic feet) operated by Servicios Múltiples de Burgos, which together represent 66% of total expected production. These projects are located in shallow waters and onshore zones of Tamaulipas and Nuevo León states.
• For more information, visit the new production report on contracts with approved Plans, https://hidrocarburos.gob.mx/statistics, in the section “Production”.

From November 2018 to date, Pemex has presented 17 Development Plans for its 20 priority fields. The Commission has approved a total of 16 of these Plans².

According to information contained in the 17 Development Plans presented by Pemex, a maximum oil production of 307,000 barrels per day by year 2020 is projected. The fields with greatest projected oil volume are Ixachi, Xikin and Esah, representing 68% of total volume.

In addition, a maximum gas production of 894,000 cubic feet daily by 2020 is projected, generated principally by 3 fields: Ixachi, Xikin and Cahua, representing 91% of estimated total volume.

As part of the Development Plans, Pemex reports project investments of US$16.087 billion³. Investments are concentrated in three fields: Ixachi, with US$7.236 billion (45% of total); Xikin, with US$2.033 billion (13%), and Esah, with US$1.143 billion (7%).

During the next 5 years of the projects, US$7.025 billion is projected to be disbursed, representing 51% of total anticipated investments.

In order to cover the costs of investments required for the development of priority fields, the National Budget proposal for 2020⁴ includes an estimated investment flow for next year of US$2.469 billion.

For further information, visit the new production report of Pemex’s priority fields https://hidrocarburos.gob.mx/statistics/

On September 30, 2015, Mexico held the bid presentation and envelope opening for Round 1 Tender 2, which resulted in the awarding of three oil and gas contracts¹.

• The company ENI MÉXICO, operator of Contract CNH-R01-L02-A1/2015, reported in July 2019, production of 5.42 thousand barrels per day from the well Miztón-2DEL, making it the first private company to produce hydrocarbons in shallow waters in Mexico.
• Oil production from Contract CNH-R01-L02-A1/2015 is equal to 54% of the total production generated from contracts awarded in the bidding round through the month of July 2019, and 6% of total production from all contracts.
• According to the Development Plan presented by the operator and approved by the Commission, the operator hopes to reach a peak of production of 90 barrels per day of oil and 60 million cubic feet of gas per day in the last quarter of 2021.
• Income to the State is estimated to reach US$4.861 billion dollars during the next five years, and US$12.372 billion during the contractual period².
• Production from all contractual areas reached 85 thousand barrels per day in July 2019, equivalent to 5% of national production.

• Hydraulic fracturing is a technique that has been used in Mexico, principally in wells located in gas fields¹.
• To date, 30,558 wells have been drilled onshore in Mexico, of which there is information available regarding drilling and well finishing for 19,563 wells².
• Using information available at the National Center of Hydrocarbons Information (“CNIH” for its initials in Spanish), 8,457 onshore wells have been identified where hydraulic fracturing has been utilized during the period from 1994 to 2016², which represents 43% of all onshore wells. Of these, 27 wells have been drilled with unconventional objectives³.
• 80% of the wells with hydraulic fracturing activities are located in three Mexican states: Tamaulipas (2,734), Veracruz (2,270) and Nuevo León (1,776).
• 60% of the fields with hydraulic fracturing activities are gas fields⁴.
• To date, these 8,457 wells have produced 1.476 billion barrels of oil and 12.038 billion cubic feet of gas⁵, equaling 3.884 billion barrels of crude oil equivalent. This production represents 7% of past production in the country.
• When hydraulic fracturing was utilized in these wells, the field operator was Petróleos Mexicanos. Currently, 695 of these wells are located in the contractual areas of 31 contracts, operated by 23 contractors, none of which is Pemex.

• Income from Remunerations (not including bonus payments) derived from 111 E&P Contracts currently in force registered an increase of 69%: in the first semester of 2019, the state received payments of MXN$5.661 billion pesos, representing additional income of MXN$2.307 billion pesos compared to the same period in 2018.
• These increases are due to additional income from Government Take of Operating Profit, which increased by MXN$1.246 billion pesos, as well as income from Contract Fees for the Exploration Phase that increased by MXN$459 million pesos, as well as by Additional Royalties which increased by MXN$441 million pesos.
• In addition, the Signing Bonus has increase petroleum income. During the first semester of 2017 and of 2018 generated income from signing or tie-breaker bonuses that totaled: MXN$1.244 billion pesos and MXN$13.168 billion pesos, respectively.

Additional Note. Oil and gas contracts that are currently in force generate income for the State via the following mechanisms:

1.Remunerations¹ stipulated in both License and Production Sharing Contracts are: Base Royalty and Contract Fees for Exploration Phase.

2.License Contracts include an Additional Royalty linked to the contractual value of hydrocarbons, as well as a Signing Bonus, both terms offered in bids during the bidding rounds.

3.Production Sharing Contracts include Remunerations in the form of Percentage of Operating Profit², as offered in bids during the bidding round.

On January 31, 2018, Round 2 Tender 4 bid presentations and envelope openings were held, during which 29 contracts received bids from 19 bidders comprised of 18 companies from 15 countries. 19 contracts were awarded, for a total area of 44,178 km².

Investments in the 19 contracts awarded in Round 2 Tender 4 total more than US$1.847 billion and will include the drilling of 20 exploratory wells in a baseline scenario. In the improved scenario, total investment could reach more than US$3.783 billion and involve the drilling of 28 wells.

• Operator Shell Exploración y Extracción de México S.A. de C.V.¹ is projected to make approximately 43% of total investment, for US$791 million and 10 wells in a baseline scenario, while in an improved scenario 15 wells would be drilled, requiring an investment of US$2.381 billion.
• State-owned enterprise Pemex projects investments of US$184 million and the drilling of two wells in a baseline scenario, and US$229 million in an improved scenario with the same number of wells.
• Contract CNH-R02-L04-AP-CS-G03/2018, operated by Chevron Energía de México, is the contract with the single largest expected investment, for US$215 million in a baseline scenario and US$354 million in an improved scenario, with the drilling of one or two wells, respectively.

Three shallow water contracts tendered in Round 1.2 are estimated to contribute US$35.271 billion dollars to State revenue in Remunerations and Taxes¹. The Operators (ENI, Hokchi and Fieldwood) are currently implementing approved Development Plans, from which information regarding volumes estimates and cost estimates of the hydrocarbons to be extracted are presented ².

Through April 2019, these three Operators have made investments for US$723 million³, principally in appraisal studies. Total Programmed Investment represents US$18.346 billion across valid contract period⁴.

These projects have payment obligations to the State in the form of Remunerations and Taxes, whose terms were determined during the contract bidding process⁵.

Given the production profiles and investment estimates provided by the Contractors, income to the State could reach US$8.444 billion by 2024, and US$35.271 billion through the valid contract period ⁶.

Through January 1, 2019, oil reserves associated with 5 Exploration and Production Contracts increased compared to the reserves estimate at the time of contract tender. Those Contracts with reserves increases are 3 Contracts tendered in the Second Tender of Round 1 (shallow waters), and two onshore Pemex Farmouts.

Through 2019, the 3 Contracts from Round 1.2 have registered 2P¹ oil reserves of 1.043 billion barrels, representing an increase of 4.4 times the estimated amount at the time of contract tender (2005). The Contract with the most growth was Ichalkil-Pokoch, operated by the company Fieldwood Energy, which multiplied reserves by seven fold.²

• 2P oil reserves in Contract Ogarrio and Cárdenas-Mora, onshore Pemex farmouts, presented increases of 25 million barrels³, reversing the decline observed since 2011.
• Historic reserve data, disaggregated by field and license, are available for consultation at the National Hydrocarbons System⁴ and in the Reserves Chart published by the National Hydrocarbons Information Center⁵.

From 2015 to 2018, investments in Exploration and Extraction Contracts and exploration studies totaled US$7.568 billion dollars, consisting in the following:

• US$3.054 billion in information investments: $302 million dollars in access fees to the National Hydrocarbons Information Center “CNIH” databases (4%); and $2.752 billion dollars in “ARES” (Autorizaciones para el Reconocimiento y Exploración Superficial, or Reconaissance and Surface Exploration Permits) exploration studies (36%);
• US$1.197 billion invested in activities related to Exploration and Extraction Contracts (16%).
• US$1.645 billion in payments to the Mexican Oil Fund (22%).
• US$1.671 billion in transfers to Pemex related to 3 signed farmout agreements (22%).

Investments in exploration, including contract-related activities and information acquisition, have generated a total investment of US$4.252 billion, which represents an additional 69% to investment made by Pemex during the same period (US$6.174 billion)¹.

• In 2017 and 2018, signed Exploration and Production Contracts represented an income of US$3.106 billion for the Mexican State equivalent to MXN$57,580 million pesos*. Of all income received, 46% (US$1.434 billion) was received by the Mexican Oil Fund (MOF)¹ with the remaining 54% (US$1.671 billion) received as transfers to Pemex².
• The income to the State via these Contracts represents approximately 32% of the income collected via the IEPS tax on gasoline and diesel sales in 2018, which reached a total of MXN$187,666 million pesos³.
• Income to the MOF from Contract payments were distributed as follows: remunerations for US$575 million (40%), and signing bonuses for a total of US$860 million (60%).
• Transfers to Pemex for US$1.671 billion were comprised of US$885 million in tie-breaker bonuses, and US$786 million in initial fees in the Trion, Cárdenas-Mora and Ogarrio farmouts.

• Through the end of last year, an estimated US$2.752 billion dollars has been invested in exploration surveys and studies via the ARES program (Actividades de Reconocimiento y Exploración Superficial).
• To date, 52¹ ARES projects have been authorized, 22 of which involve the acquisition of new data, and 30 of which involve re-processing existing data held by the National Hydrocarbons Information Center.
• Of the 30 re-processing projects, 4 involve previously-acquired well data² integrated into the system under 2017 regulations that permitted development analysis of physical and digital well data samples.
• In addition, 10 of the 22 projects to acquire new data involve seismic 2D surveys, 8 involve seismic 3D surveys, and 5 employ WAZ³ technology.

• Investment approved by the CNH in plans for exploration and development contracts¹ amounts to US$20.571 billion. Of this amount, US$3.441 billion in investments are programmed for the first three years (2015-2018), US$8.948 billion for the following six years (2019-2024) and US$8.182 billion for the period 2025-2041.
• Of the approved investment, US$3.574 billion correspond to exploration activities² and US$16.997 billion to development activities. In addition, US$18.326 billion correspond to contracts located in shallow waters, US$1.467 billion in deep waters and US$778 million in onshore projects.
• The CNH updates and publishes information related to the investments scheduled in the plans through the Information System of Hydrocarbons (SIH), available at: https://portal.cnih.cnh.gob.mx/dashboard-sih.php.

To date, the National Hydrocarbons Commission (“CNH”, for its initials in Spanish) has signed 18 collaboration agreements with 14 universities and 4 research centers. It is in the process of signing 9 more agreements.

These agreements establish mechanisms to access information held in the CNH’s National Hydrocarbons Information Center, and are key to the future of Mexican human capital in engineering, as well as to the development of science and technology in the national oil sector.

In addition, the collaboration agreements encourage transparency and accountability in the sector.

16 agreements have been signed with national institutions: 4 in Tabasco, 3 in Veracruz, 3 in Mexico City, 1 in Baja California, 1 in Coahuila, 1 in the State of Mexico, 1 in Nuevo Leon, 1 in Oaxaca and 1 in Puebla. The CNH has signed two international agreements, both with the University of Austin in Texas, U.S.A.

Tampico-Misantla is Mexico’s largest basin in terms of prospective resources, and holds 21% of the nation’s 2P reserves of crude oil equivalent as of 2018. In 2032, its estimated production potential could range between 666 and 929 MB/D of oil, and between 1,359 and 2,093 MMCF/D of natural gas.
The volume of potential production was estimated taking into consideration entitlements (license areas) as well as existing and future contractual areas.
Prospective production takes into account conventional and unconventional prospective resources in the areas included in the 5-Year Plan, asumming yearly tenders of a total of 30 blocks with a 60% award rate, in addition to 6 E&P projects undertaken by Petroleos Mexicanos.²
In the case of tenders of conventional areas, expected production curves are estimated according to the identified exploratory opportunities. In the case of unconventionals, 20% recovery of prospective resources identified in the area is assumed, and using international analogues.

Through an analysis of storage obligations related to the security of natural gas supply in 11 countries of the European Union, it was found that:

8 of these countries have storage obligations of natural gas, except for Germany, Austria and the United Kingdom.

In terms of the storage obligations (calculated as equivalent days of national consumption), 3 categories of countries can be defined:

• Countries with less than 20 days’ storage capacity: Denmark, Czech Republic, Spain and Poland.
• Countries with between 20 and 40 days’ capacity: Italy and Bulgaria.
• Countries with more than 40 days’ capacity: Hungary and France.

The total amount of mandatory storage is computed differently in each country and, more specifically, is determined with reference to: projected winter demand, import quantity in a given period, past firm sales in a given period, total consumption and supply standards.

Although in Germany, Austria and the United Kingdom the storage of natural gas is not mandatory, these 3 countries have storage equivalent to 95 days, 266 days and 19 days of national consumption, respectively.

The National Hydrocarbons Commission, through the National Hydrocarbons Information Center (CNIH) collects, preserves, manages, analyzes, uses and updates the information belonging to the Nation, obtained from Recognition and Surface Exploration activities (G&G permits), as well as from hydrocarbons Exploration and Extraction activities.¹

Currently, CNIH’s users can:

• View the technical information in physical data rooms. To date, 1,562 visits sessions have been made.
• Request access to the information through licenses of use.² To date, 176 companies have requested access, and in total 144 licenses of use have been granted, 329 requests for information (supplements) approved and 282 bid data packets accessed.³
• Visits to the Nationapository for information of physical samples. To date, 212 visits have been made and 5,147 specialized services attended.

Visit the CNIH’s portal of technical information at: https://portal.cnih.cnh.gob.mx/ and stay informed.

Mexico is ranked first in transparency of tender processes and contract management in the extractive sector, according to the report ”Open Contracting for Oil, Gas and Mineral Rights: Shining a Light on Good Practices", published this June by the Natural Resource Governance Institute (NRGI) and the Open Contracting Partnership (OCP).

14 countries and 16 best international practices in different areas were considered in the evaluation. Mexico’s CNH excelled in 7 practices, positioning itself as a leading institution in transparency.

In the report, Mexico excels in the following categories: 1) Explaining the system of the tender process; 2) Transparency of decision-makers; 3) Clear, effective and timely communication regarding the areas to be allocated; 4) Public servant conflict of interest statements; 5) Publishing contract awards and outcomes of allocation; 6) Publishing contracts with annexes and disclosures, and 7) Follow-up and compliance with contract terms and fulfillment.

The CNH has created a plan for proactive transparency, in which it has been able to advance thanks to a permanent and open dialogue with civil society organizations.

In terms of profit-sharing, economic terms for the Mexican State in offshore oil contracts are more favorable than those in the United States and Brazil.¹

In shared production contracts (32), government take was 75% and in license contracts (27), it was 63%.²

The percentage of government take in Mexican license contracts is more than that of concessions in Brazil and license contracts in the United States, where the Mexican State receives 59% and 55% of profits, respectively.³

As of March 2018, income received by the Mexican State from oil contracts totals $304.9 million dollars.⁴

Since 2013, 49 fields have been discovered, incorporating reserves for a total of 917 MMBBL of oil and 2,041 BCF of gas.¹

In 2017, PEMEX announced the discovery of the field Ixachi, incorporating reserves of 65.6 MMBBL of oil and 761.8 BCF of gas. This represented 37% of the total volume of gas discovered between 2013 and 2017.²

In 2023, Ixachi will reach its peak of production, with 22 KBPD of oil and 233 MMCFD of gas.³

2P reserves of crude oil in Mexico reached 12,089 MMB. Of these, 1,421 MMB correspond to fields without production, whose estimated production is a total of 330 KBPD.¹

In comparison, Venezuela has decreased its production to approximately 700 KBPD (33%) after the termination of the supply agreement with OPEC in 2016. It is estimated that production will continue to decline by an additional 300 KBPD in 2018.²

Meanwhile, Canada faces difficulties selling its crude, due to capacity restrictions of crude oil transport pipelines from Alberta to the US Gulf Coast³, as well as delays in the construction of the Transmountain pipeline which will transport crude to Asia.⁴ In this context, the price of oil has suffered severe discounts (WTC and WCS price gap at US$ - 17.40/b)⁵.

The current international environment presents an excellent opportunity for the development of heavy oil in Mexico.

Investment approved by CNH in plans for exploration and development contracts:

• The amount of investment approved so far amounts to 12,047 million dollars (mmusd).
• By location, of every 10 dollars of approved investment, 8.4 correspond to shallow waters (10,064 mmusd), 1.2 to deep waters (1,467 mmusd) and 0.4 to onshore (517 mmusd).
• By basins, highlights that the 86.4% of the approved investment corresponds to the basins of the Southeast, while the deep Gulf of Mexico concentrates a 12.2% of the investment.
• More than 90% of the approved investment focuses on contracts located in Campeche, Tabasco and Tamaulipas.

Oil Activity Indicators January - April 2018:

• There were 37 drilling rigs operating, which represents an increase of 54.1% compared to the same period in 2017. Among these rigs, 24 were being used for development activities and 13 for exploration ^1.
• Regarding location, 17 rigs were onshore and 20 offshore. The onshore drilling equipment being used is 3.4 times greater than the active equipment observed from January to April 2017.

62 wells were drilled, a figure which represents more than double of what was observed in the first quarter of 2017, when 24 wells were drilled. Drilled wells are mostly onshore developments (53), of which 36 were in Tampico Misantla ^2.

• Discovered onshore fields in Mexico are, on average, 3 times larger than fields in Colombia and 4 times larger than those in Brazil.
• Onshore discoveries in Mexico average 59 MMBOE, while in Colombia they average 23 MMBOE and in Brazil 16 MMBOE.
• The median (P₅₀) of onshore fields in Mexico is 22% greater than that of Colombia and 92% greater than the median in Brazil.
• Of the Mexican onshore fields, the largest include: Samaria (2,214 MMBOE), Poza Rica (1,871 MMBOE) and Jujo-Tecominoacán (1,702 MMBOE), which present recoverable reserves greater than the largest onshore fields in Colombia (Cano Limón: 1,341 MMBOE) and Brazil (Carmópolis: 443 MMBOE).

Offshore oil wells located in the Southeast Basin are the most productive in Mexico. During the first five years of well life, these wells reach a cumulative production of 13.1 million barrels of oil on average. After 25 years of well life, they reach cumulative production levels of 28.2 million barrels.

Offshore wells in the Tampico-Misantla Basin present production of 3.1 million barrels at 25 years, greater than onshore wells in the Southeast Basin.

Regarding non-associated gas production, wells located in the Veracruz and Sabinas basins perform best, with cumulative production of 5 billion cubic feet at five years of well life.

• The State received income from Hydrocarbons Exploration and Production Contracts in the amount of $339 million dollars during 2017, 18 times the amount received in 2016 ($19 million dollars).
• $180 million dollars of this income was generated by signing bonuses from tender rounds, $108 million from the sale of hydrocarbons belonging to the State, $36 million from royalties, and $15 million from contract fees.
• Income in January 2018 reached $24.09 million dollars, an amount 10 times the income received in January 2017 ($2.52 million dollars).

Proven reserves (1P) in Mexico reached 6,424.2 MMB of oil and 10,022.4 BCF of gas in 2018.

In addition, the ratio of the amount of proven reserves (1P) to national production increased in 2018 from 2017: 

• In the case of oil, the ratio increased from 8.9 to 9.1 years;
• In the case of gas, it increased from 4.9 to 5.4 years.

The new estimate of 1P reserves in areas tendered in the Second Tender of Round 1 (R1T2) contributed to the tripling of the volume of reserves in said areas, from 83.4 to 251.1 MMBOE.

Discoveries in the Veracruz and Southeast Basins contributed in the order of 153.8 MMBOE.

In Bidding Round 3.1 for shallow waters areas in Mexico, 45.7% of the offered contracts were awarded, similar figure to Brazil, where 46.8% were awarded and with a very outstanding results compared to United States, that placed 1% of the contracts.

The tender in Mexico was crowded, with the participation of 18 companies from 12 countries, of which 14 were winners.

Participation in Round 3.1 was highly competitive. On average, 2.3 offers were received per contract, a figure higher than that of the most recent tenders in Brazil4 and the United States, in which 1.5 and 1.1 offers were received per contract, respectively.

In Round 3.1, 42.3% of the total area were awarded, while in Brazil was 48.4% and in the United States 0.1%.

• Petróleos Mexicanos (PEMEX) has won 14 Exploration and Hydrocarbons Production Contracts during the 9 Mexican oil and gas tender processes¹, making it the company to which the most contracts have been awarded thus far.
• For these 14 contracts, PEMEX bid as an individual company for 3 contracts and in consortium for 11, making alliances with 7 international companies from 7 different countries. PEMEX has agreed in these contracts to drill 8 exploratory wells.
• The Mexican company Jaguar and Dutch company Shell² are in second place, each with 11 awarded contracts. Jaguar won 5 contracts individually and 7 in consortium. Shell was awarded 4 contracts individually and 7 in consortium.
• Jaguar is the company with the largest number of promised wells, for a total of 20 onshore wells. In second place is Shell with 13 deepwater wells.
• Through the conclusion of the first tender of Round 3, 107 contracts have been tendered, covering an area of approximately 88,650 km².

• For the First Tender of Round 3, during which 35 production shared contracts in shallow waters will be tendered, 21 companies were registered as 36 bidders: 14 individual companies and 22 in consortium.

• The company Deutsche Erdoel Mexico (DEA) will participate as 9 bidders, making it the company with the most associations in this tender. In second place appears Pemex, being able to participate individually and through 6 consortiums.

• It also highlights that 9 of the 21 companies (see chart on the left) may participate as bidders in more than three different ways, and only 3 of the 21 (Chevron, ONGC Videsh and Repsol) will participate exclusively as individual companies.

• It is important to note that 17 of the 21 registered companies have won contracts in previous bidding rounds (in Mexico). This is the first time Malaysian company Sapura Exploration and Production participates in a bidding process in the country.

• The Southeast Basin contains 22 discovered heavy crude fields that have yet to be developed.
• Of these, 14 are State Fields that have yet to be tendered. The most important are: Pit, Kayab, Kastelán, Alak and Kach. ¹
• 2P reserves in these 14 fields are estimated to be 796 million barrels of crude 10° API, on average; taken together, production is estimated to reach 186,000 barrels per day in 5 years².
• On the other hand, 8 heavy crude fields of Pemex³ were identified currently not in production, including: Ayín⁴, Batsil, Utsil and Tekel.
• 2P reserves in these 8 fields are estimated to be 627 million barrels of heavy crude 14° API on average; taken together, production is estimated to reach 145,000 barrels per day in 5 years⁵.

Over the last five years, Western Canadian Select (WCS) heavy crude has gained $14 dollars on West Texas Intermediate (WTI). 

This decrease in price spread can be explained by increased demand for heavy crude from US Gulf refineries, as well as the decline in exports from Latin America. 

To increase the supply of heavy crude to these refineries, the construction and extention of pipelines from Canada has been proposed, but it is likely these projects will take years to complete.¹ 

At a global level, there is growing demand for heavy crude, especially from China and India. This presents an opportunity for these types of crude in Mexico, especially from already discovered offshore fields. 

• Since 2015, 332,050 kilometers of information have been acquired using the seismic 2D method, via 10 authorized Reconnaissance and Surface Exploration Activities (“ARES”, for its initials in Spanish). Newly acquired lengths from these studies tripled the 2D-seismic data available in the Document Archives.
• Additionally, two 3D studies using Wide-Azimuth technology (WAZ) have been authorized to acquire 87,096 km² of additional data. With this information, we quadrupled the 3D-seismic with WAZ technology data available in the Document Archives.²
• So far, there have been 39 ARES authorized, of which 18 involve data acquisition and 21 involve data reprocessing.³

• In the period 2018-2021, 24 offshore exploratory wells will be drilled each year, according to the committed investment programs.
• This level of offshore exploration represents a record high over the last 30 years, and 44% of activities will be by new operators.
• Between 2018-2021, 43 wells are scheduled to be drilled by the new operators: on average, 11 wells per year (3 shallow water and 8 deepwater per year).

• Acreage associated to offered contracts in Mexico’s Round 2.4 was 66,425 km²; this is 78% lower than in the US and 46% lower than in Brazil.
• However, the total area in awarded contracts in Mexico’s last round was 44,178 km², which is twice the area awarded in Brazil and 21 times more the area in the US.
• Likewise, Round 2.4 in Mexican deep water regions received, on average, more offers by area (2.1), which is higher than the average in Brazil’s (1.3) and the US’ last rounds (1.1).¹
• Finally, Government Take in Mexico is estimated at 64.7%², higher than historical average in deepwater in the US, calculated at 55%.³

• For the last tender of Round 2, corresponding to deep water contracts, Pemex may participate through 7 bidders, placing itself as the company with the largest number of associations in this tender.
• In total 21 companies were registered through 26 bidders: 9 individual and 17 in consortium.
• Stresses that 9 companies may participate through at least three bidders, either individually or in consortium. While only BHP Billiton and ExxonMobil will participate only individually.
• 13 companies registered for this tender, also participated in the fourth tender for round 4 in deep water. In that tender, Total was the company with the highest allocation, winning 3 contracts, one in association with ExxonMobil and two in association with Statoil and BP, with which it returns to participate in R2.4.

• Average accumulated production per well in Veracruz Basin in its first 5 years is estimated at 4,921 mmcf. This production is higher than average accumulated production per well in the same period in these regions:
  • Burgos, whose average accumulated production per well is calculated at 1,404 mmcf;
  • Eagle Ford Southeast unconventional play, with an average accumulated production 1,788 mmcf per well;
  • Eagle Ford Southwest unconventional play, with 3,628 mmcf per well, on average.
• This means that an average well in Veracruz exceeds by 250% a Burgos’ average well performance, by 175% an Eagle Ford Southeast’s well, and by 36% an Eagle Ford Southwest’s well in the first five years of production.
• Standard well in Veracruz Basin has an average accumulated production over its lifetime of 6,639 mmcf, which is 135% higher than mean accumulated production in Burgos’ typical well, calculated at 2,814 mmcf^/1, and 117% higher than average accumulated production per well in Eagle Ford Southeast, calculated at 3,049 mmcf.^/2
• Average accumulated production per well in Eagle Ford Southwest unconventional play is 25% higher than average Veracruz’s well accumulated production.
• Veracruz Basin covers an extension of 34,825 km². Main Plays in this basin are from Miocene age, with wet gas and dry gas as principal hydrocarbons. Historically, 571 producers wells have been drilled but only 226 wells were considered in this analysis.

• Investments in contracts from Round 1 and 2, and farmouts are estimated at $61,012 mmUSD for the next 25 years.^/1
• So far, 72 contractual areas have been assigned. 38 contractual areas were assigned in Round 1, 31 areas in Round 2 –with one pending bid-, and 3 areas were assigned in Farmouts.
• All 9 deep water contract investments represent 71% of the total expected investment. Investments in the 15 contracts with areas located in shallow waters make 24% while investments in the 48 onshore contracts is equal to 5% of the total expected investment.

• Price gap between Brent and WTI has widened since October 2016. That month, price difference was almost zero: Brent price was $49.5 per barrel and WTI costed $49.8 per barrel.
• In December 2017, Brent price has averaged $64.1 per barrel, $6.9 USD higher than WTI price, sold at $57.1^/1 This difference is the highest value observed since March 2015, when it reached 8.1 USD.
• This increase seems to be related to a greater oil production in unconventional fields in the United States.
• In October 2017, US oil production in unconventional fields reached 3,200 kbd, 18% higher than production in the same period last year.^/2

• Average recoverable reserves (RR) of offshore oil fields discovered in Mexico , estimated at 471.4 MMb, are 7 times greater than the average recoverable reserves in the US’ fields (64.6 MMb) and 2 times greater than Brazil’s fields (217.4 MMb).
• 66% of the offshore oil fields discovered in Mexico have greater Recoverable Reserves than the median field in Brazil (calculated at 48.8 MMb), and 88% are bigger than the US median field (estimated at 20 MMb).
• Largest recoverable reserves for offshore oil fields discoveries in Mexico includes: Akal (15,499 MMb), Ku (3,231 MMb), Maloob (2,693.71), Abkatún (2,415 MMb) and Zaap (1,856 MMb).
• The most recent offshore discoveries in Mexico are Zama (680 MMb) and the reserves re-assessment for Amoca (400 MMb).²

• From January to October 2017, oil production reached, on average, 1,966 kb/d (thousand barrels per day). 1,061 kb/d were classified as heavy and extra-heavy oil and 93% of this volume was produced in offshore fields.
• Production of light and medium crude oil added 904 kb/d. 32% corresponds to onshore and 68% to offshore production.
• On one hand, practically all heavy oil production (Maya and Altamira crudes) is sent for export. During January to October 2017, 1,024 kb/d were exported.
• On the other hand, 88% of light crude oil (Olmeca and Isthmus crudes) was sent to national refineries, with an average consumption volume of 798 kb/d.

• Mexico is an alternative to connect the hydrocarbons produced in the Gulf of Mexico with the Asian markets, through the Istmo de Tehuantepec.
• Travel time to Chiba port in Japan via the Panama Canal is calculated at 25 days. Travel time via Istmo de Tehuantepec is estimated at 17 days. This implies that shipping hydrocarbons to Asia via Istmo de Tehuantepec is 32% faster.
• Japan imported 3.1 millons of barrels per day in the period January-Octuber 2017.³ Satisfying this demand via the Panama Canal would result in a bottleneck, since it is estimated that only 50 oil-laden vessels with a capacity of 500,000 barrels each have passed through in the same period.⁴ This is equivalent to only 3% of the Japanese demand.
• Through the existing oil pipeline⁵ in the Itsmo de Tehuantepec, up to 351,000 barrels per day could be transported, equivalent to 11% of Japan's demand, with the possibility of constructing new oil pipelines to increase transport capacity.

• Mexico could offer export alternatives for natural gas produced in the Permian Basin. For instance, Manzanillo port has a 500 mmcfd regasification capacity¹. This facility could be transformed to liquefy and export Liquefied Natural Gas (LNG) to Asia.
• Travel time from Manzanillo to Japan could be 39% lower than from Louisiana, going from 23 to 14 days.²
• Maritime travel cost to Japan from Louisiana is estimated at $2.40 USD/mmBTU (including a $0.20 USD/mmBTU Panama Canal toll); traveling from Manzanillo is projected at $1.36 USD/mmBTU.³
• Transportation cost from the Waha Hub (Permian Basin) to Manzanillo is calculated at $0.45 USD/mmBTU⁴ (estimating a 1,978 km transport pipeline⁵). On the other hand, pipeline transportation cost from Waha to Henry Hub is estimated at $0.25 USD/mmBTU.⁶
• Adding up maritime and pipeline transportation costs, exporting natural gas from the Permian Basin to Japan through Manzanillo port would be estimated at $1.81 USD/mmBTU total, 32% lower than exporting from Louisiana, calculated at $2.65 USD/mmBTU.

• By 2017, Mexico has a volume of 112.8 Bboe of prospective resources. Tampico-Misantla and Deep Gulf of Mexico basins combined represent 58% of these resources.
• Tampico-Misantla’s prospective resources are estimated at 37.1 Bboe, accounting for 33% of the total resources.
• As for the Deep Gulf of Mexico, its resources are estimated at 28 Bboe, that represent 25% of the total resources.
• Southeast Basins, Sabinas-Burro-Picachos and Burgos accumulate 38% of the prospective resources. While the basins of Veracruz, Yucatan Shelf and Chiapas Fold Belt constitute altogether barely 4% of the total.

• From 1976 to 2016, Mexico drilled 316 offshore exploration wells in the Gulf of Mexico (GOM), while Brazil drilled 2,420 and the United States 6,076 in the GOM.
• With just 5% and 13% of US and Brazil’s offshore exploration wells respectively, Mexico produced 1.6 times more hydrocarbons than the US and 2.8 times more than Brazil.

• In September 2017, national oil production stood at 1,732 Mbd (thousands of barrels per day), while in the previous month it reached 1,932.1 Mbd, representing a decrease of 10%.
• In percentage terms, this is the most significant fall in the last 20 years and the level of production is similar to that reached during the first months of 1980.
• The early maintenance work carried out by Pemex during the first days of September in the Ku-Maloob-Zaap* asset after Hurricane Harvey, led to a 16% decrease in the production of that asset. This affected notably the national indicator since so far in 2017, more than 4 out of every 10 barrels were produced by Ku-Maloob-Zaap.

• As a result of the farmouts tenders, Pemex collected $2,513.52 million dollars (mmusd) in monetary contributions, coming from the three blocks awarded: Trion, on December 5th, 2016, Cárdenas-Mora and Ogarrio, on October 4th of this year.
• The $ 2,513.52 mmusd consists of: $ 1,974 mmusd for the joint investment account in Trion, $ 166.5 mmusd in Cárdenas-Mora and $ 373.02 mmusd for Ogarrio. While the State will receive $ 93.25 mmusd.
• These contributions represent 23.3% of the estimated capital expenditures held and to execute by Pemex in 2017^\1.

• In August 2017, Pemex flared and vented 128.2 million cubic feet per day (MMCFPD) of natural gas; this cut is also equivalent to a reduction of 352.4 MMCFPD in relation to August 2016. In perspective, the latter figure represents 9% of what was domestically produced in August 2017.
• Most of the reduction was achieved in the Ku-Maloop-Zaap asset with a participation of 173.1 MMCPFD, followed by the Abkatún-Pol-Chuc asset with a decline of 103.7 MMCPFD; these are equivalent to a reduction of 85% and 95%, respectively.
• This enhancement in gas usage takes place after the publication, in January 2016, of the Natural Gas Usage Technical Provisions by CNH as well as the corrective programs that have been implemented given these Provisions.

• In the 7 bids of rounds 1 and 2, Mexican companies reach an approved investment and committed investment of $689 million dollars, Mexican companies associated with foreign companies $667 mmusd and foreign companies $1,030 mmusd.
• For onshore blocks an investment of $827 mmusd is reached, of which 83% corresponds to Mexican companies. For shallow water blocks, an investment of $ 1,072 mmusd and 47% of this amount corresponds to Mexican companies in association with foreign companies.
• For deepwater blocks, Pemex and Sierra have allotted blocks in association with foreign companies, representing 14% of the investment committed in R1.4.

• The 4 tenders from round one and three for round two have triggered the drilling of 104 wells. Of these, 66 are exploratory and 38 are for development.
• Of the plans approved for tender one, two and three of round one, the drilling of 51 wells, 13 for offshore exploration and 38 for onshore development, were acknowledged.
• For tenders R1.4, R2.1, R2.2 and R2.3, there is an investment commitment equivalent to the drilling of 53 exploratory wells *; of which 26 will be drilled onshore and 17 offshore.
• The 66 exploratory exploration wells are equivalent to Pemex's exploratory drilling of the last 3 years (2014-2016).

• Investments for $ 1,142 million (mmusd) have been approved for the blocks awarded of the first three tenders of round one.
• For tenders 1.4, 2.1, 2.2 and 2.3, there is an investment commitment * of at least         $ 1,245 mmusd. In the coming months the CNH will approve the investments plans from these tenders.
• The investments related to the initial stage of these projects reach $ 2,387 million dollars. In case of commercial success, the total investments could exceed $ 50 thousand mmusd **.

• In June 2017, dry natural gas production stood at 3,164 million cubic feet per day (MMcfd), while imports totaled 5,027 MMcdf, an increase of 3.6% over the previous month.
• Since 2016, the volume of imported natural gas is higher than domestic production.
• The differential between imports and production went from 709 MMcfd in 2016 to 1,863 MMcfd in June 2017. In other words, the gap between imports and production increased by 162%.

• The asset Ku-Maloob-Zaap, is composed of the fields: Ayatsil, Bacab, Ku, Lum, Maloob and Zaap. In June 2017, 44% of the national oil production came from this asset.
• On November 15, 2016, the National Hydrocarbons Comission sanctioned PEMEX for non-compliance with the gas utilization targets for this asset. As a result, PEMEX presented a program of corrective actions amounting 3,028 million dollars for the period 2016-2019.
• As a result of corrective actions, in the first half of 2017 a reduction in natural gas flaring and venting of 55% was achieved, going from 197 million cubic feet per day (MMcfd) in January to 88.3 MMcfd in June.

• In June 2017, the five fields with the largest oil production in the country, according to their contribution, were: Maloob, Zaap, Xanab, Ku and Xux. Together, they produced 1,063.3 thousand barrels per day (KBPD), of a national total of 2,009.6 KBPD.
• The Xanab and Xux fields, began production in 2009 and 2014, respectively. For the first half of 2017, they reached an average production per well of 13.8 KBPD and 5.1 KBPD, respectively.
• While the Maloob, Zaap and Ku fields saw their first barrel in 1985, 1992 and 1981, respectively. In the first half of 2017, they achieved an average production per well of 5.1 KBPD, 5.5 KBPD and 3.2 KBPD respectively

• In the first half of 2017, production of the main non-associated natural gas basins* fell 57% from the level reached 10 years ago and is at its lowest point in the last 15 years.
• The drilling of wells in these basins has been in decline since 2006, which has directly impacted the production level. So far in 2017, no new wells have been drilled.
• The fall in the production of non-associated gas is related to the collapse of the price of this hydrocarbon, which lost 55% of its value in 10 years.

• In June 2017 there were 15.5 drilling rigs in offshore exploration, the largest number of the last 10 years.
• About one in two drilling rigs engaged in offshore exploration were operated by new contractors.

• On April, 2017 Mexico´s natural gas supply without considering the national oil company´s consumption, reached 5,810 million of standard cubic feet daily (mmscfd), of which 4,683 mmscfd were imports, that represents 81%.
• In early 2015 imports were 59% of natural gas supply and on February 2017 reached their highest level on 84%.
• Pemex produced 3,218 mmscfd, and its consumption was reported as 1,936 mmscfd, that represents 60% of its production.

• Talos Energy LLC discovered light oil in the drilling of the Zama-1 well.
• According to the latest calculations made by the own Company, original oil in place currently range between 1,400 and 2,000 million barrels of equivalent oil.
• Also, Eni announces the increase over its Amoca´s field oil in place resource to 1,000 million barrels of equivalent oil.

• The second and third hydrocarbons bidding Rounds of Mexico´s Round 2, will take place on July 12, 2017.
• There are 11 prequalified companies for Round 2.2 and 28 for Round 2.3.
• 65%, 6 of the prequalified bidders for Round 2.2 are Mexican companies.
• 75%, 21 of the prequalified bidders for Round 2.3 are Mexican companies.

• 10 auctioned areas were adjudicated to 12 companies in Round 2.1.
• This is the first time that companies from Germany, Spain and Russia won an area in Mexico´s bidding rounds.
• PEMEX won two areas, both of them as a consortia, one of them with DEA Deutsche Erdoel and the other with Ecopetrol.

• Oil production in Mexico was 2,013 thousand barrels per day in April 2017.
• The main oil producers fields in Mexico are Maloob, Zaap, Xanab, Ku and Xux. Those fields reached an aggregated production of 1,056 thousand barrels per day, in average during April.
• The fields with the main oil production are located in shallow water of the Gulf of Mexico.

• 3P reserves in México were 25,858 MMBOE as of January 1st, 2017
• The discovery of five fields: Doctus, Nobilis, Pokche, Teca and Uchbal, added 684 MMBOE.

• 25 bidders prequalified for Round 2.1 bidding process. 20 individually and 5 in consortia.
• Among prequalified bidders 26 companies are participating.
• The prequalified companies are from 15 different countries, including 4 from Mexico.

• Between January and February 2017, the Mexican Oil Fund received 4,080 million dollars (mmUSD) as a result of hydrocarbon E&P activities.
• Payments reached 26,819 mmUSD in 2015, while in 2016 were 16,891 mmUSD.
• The main portion is the “Derecho de Utilidad Compartida”, with 86.76% of total payments in 2017*.

• The Round 1 Contract Areas have an approved investment of 1.076 billion dollars for the period 2015-2020.
• 71% of total investments are programmed to be spent during 2017.
• 57% of Round 1 total approved investment corresponds to the Second bidding process Appraisal Plans execution.

• During March 2017, 25 drilling rigs operated in Mexico, 17 in exploratory activities and 8 in development.
• 3 of the rigs worked within the contractual areas.
• The number of active rigs has shown a decrease of 87%, between 2009 and 2017*.
• Development drilling rigs have shown the main decrease, going from 150 on average during 2009 to 19 in 2016.

• The national oil production grew 0.1% in March 2017 compared to the previous month.
• The oil produced reached 2,019 thousand barrels per day, breaking its downward trend for the first time since March 2016.
• The fields with the main increases were Xanab, Maloob, Xux, Ayatsil and Zaap.
• The rest of the fields decreased their production by 21.1 thousand barrels per day.

• On March 31^st, 2017 PEMEX completed the exploratory well Koban-1. Resulting on a commercial producer of gas and condensate.
• The well is 12 meters under the sea level and has a vertical drilling depth of 6,425 meters.
• The productive interval of 67 meters has a top of 6,164 vmbrt and a base of 6,231 vmbrt, with a pressure of 611 kg/cm²

-On january 1^st, 2017 Mexico´s proven reserves (1P) met up to 9,161 mmboe.

-This figure represents 10.6% decline compared with last year´s 1P  (10,243 mmbpce).

-77% of the volume corresponds to oil reserves (7,037 mmb).

-The ”Marina Noreste” region concentrates 53% of the national 1P reserves.

• On February 12th 2017 the exploratory well Teekit-1001 was completed, resulting on a commercial producer of 22.4 °API oil.
• Production trials turned out in a peak of 3,083 vmbrt and a base of 3,116 vmbrt, with a pressure of 328.9 kg/cm².
• The well is 30 meters under the sea level and has a drilling depth of 3,613 meters.

• At 2015, Natural Gas Imports represented 67% of the National Demand, without considering Oil & Gas Industry demand.
• Natural Gas Imports reached 4,200 million of cubic feet per day in 2016.
• Natural Gas Imports increased 188% since 2010.