Oil and gas well intervention costs in Mexico could surpass USD 3 billion over the next 3 years

Source: press release, 5 November 2020

Estimated intervention costs in Mexico from 2021 to 2023 (source: Comisión Nacional de Hidrocarburos; Rystad Energy research and analysis)
Estimated intervention costs in Mexico from 2021 to 2023 (source: Comisión Nacional de Hidrocarburos; Rystad Energy research and analysis)

As around 75% of Mexico’s oil and gas producing wells are ageing, intervention activities should remain resilient in the years ahead, likely surpassing USD 3 billion from 2021 to 2023, a Rystad Energy analysis shows. Around 30% of that will be spent onshore with the remaining 70% going offshore.

The number of producing offshore wells in Mexico dropped by 14% between 2015 and 2020, with a steeper decline for onshore wells, at 27%. The drops follow relatively slower drilling activities over the same timeline, with offshore drilling at around 60% of the level seen between 2010 and 2015. For onshore drilling, the drop was even bigger, with the number of completed wells down nearly 80% from 2015 to 2020 compared to the previous 5-year period.

As a result, the median age of producing wells has increased for both onshore and offshore wells over the past 5 years. In the offshore segment, the median age of producing wells has increased from 8.1 years to 11.5 years, while doubling for the onshore segment, from 6.7 to 13.6 years.

“Both onshore and offshore drilling activity experienced peaks before 2015, so the median age for producing wells in Mexico has increased significantly in the past few years. Water cuts have also increased for a majority of both offshore and onshore wells from 2015 to 2020. In addition, there seems to be an increased willingness to pursue intervention on younger fields,” says Daniel Holmedal, energy research analyst at Rystad Energy.

Oil wells typically require more intervention than gas wells. Looking deeper into specific fields, using costs from Comisión Nacional de Hidrocarburos (CNH), Rystad Energy sees some clear examples of fields that are likely to need spending on intervention over the next 3 years.

Among the onshore fields that will require the most spending, Samaria Terc leads by far. Most of its producing wells, at more than 150 in total, have a median wellbore age of 8 years with wellbore lengths of around 2,100 metres. The Cardenas, with eight producing wells and the Madrefil field, with six, are the second and fourth in onshore spending, respectively. They have fewer producing wells, but the wellbore length is longer, at 5,800 metres, for the Cardenas and 6,600 metres for the Madrefil. The more complex wells at Cardenas and Madrefil are likely to require costlier intervention techniques compared to the ones at Samaria Terc.

In the offshore segment, four out of the top five fields in terms of spending are fixed facilities with Ku being the sole exception as a floater. In terms of the wellbore age, Ayatsil-Tekel at 2 years and Balam at 6 years have the lowest median wellbore age, along with the longest offshore wells at 4,300 metres and 4,900 metres, respectively.

For service suppliers exposed to the Mexican market, these fields provide a good breadth of intervention possibilities in the years ahead. While fields like Ayatsil-Tekel and Balam are likely to require costlier intervention techniques, Zaap and Maloob will see lighter interventions.

Learn more in Rystad Energy’s WellCube.