Wintershall Dea makes progress in Mexican shallow waters

At the end of April 2023, Wintershall Dea announced the discovery of hydrocarbons in the exploratory well Kan-1EXP new-field wildcat. The well was spudded on 15 October 2022 as part of the exploratory plan for the CNH-R03-L01-AS-CS-14/2018 contract, Area 30 block, offshore Sureste Basin. The Kan-1EXP well lies in the southwestern corner of the Area 30 block, in a water depth of 50 m, about 26 km off the coast.

Wintershall Dea Mexico is the operator of the contract with 40% working interest, while Premier Oil Mexico has 30% and Sapura OMV also has a 30% working interest. In June 2018, Mexico's National Hydrocarbons Agency (CNH) officially awarded the consortium the Production Sharing Contract (PSC) for the Area 30 block, after bidding the maximum 65% state take, 1.5 working units (equivalent to two commitment wells), and a tie-break bonus of USD 51.15 million. Wintershall Dea's exploratory plan contemplated the drilling of two northwest-southeast oriented prospects (Kan-1EXP and Ix-1EXP) located in the southwest and northeast corners of the block, respectively.

With interests in some material assets in Mexico, Wintershall is now one of the leading international upstream companies in the country. In addition to the producing onshore asset, Ogarrio, where Wintershall has PEMEX as its partner, the company has in its portfolio the Cholula, Zama, Polok and Chinwol offshore discoveries. At the end of 2022, the company also signed an agreement with Hokchi Energy to acquire shares in the producing Hokchi field. The transaction is still subject to government approval but is expected to increase Wintershall's portfolio in Mexico.

The Kan discovery has its importance in the company's portfolio as the first offshore discovery made by Wintershall as operator in Mexico. With an estimated hydrocarbon in place of 200-300 MMboe, the new discovery can add an estimated 75 MMboe of 2P recoverable resources to the company's portfolio according to S&P Global's E&P data EDIN product.

PEMEX is currently responsible for almost 80% of total estimated recoverable resources in Mexico. If we consider the remaining 20%, Wintershall takes the second position among the international companies, only after Eni, assuming an important role in the country's production outlook.

The evaluation plan for Kan-1EXP is expected to be submitted to CNH in the middle of the year. Block 30 is located in the Sureste Basin, where Wintershall has some familiarity, with Zama, Polok/Chinwol discoveries, as well as the Hokchi development in close proximity.

Although there is still no information on Kan development plans, S&P Global Vantage has modelled the Kan asset to evaluate its economics considering the usual practices in the region. The development scenario for Kan project was defined with the installation of a production platform with topside module capable of processing 30,000 barrels of oil per day (bo/d) for optimum recovery of the total 2P resources estimated at 70 million barrels (MMbbl) of oil and 28 Bscf of gas (data obtained from S&P Global's E&P data EDIN product). Oil is considered to be periodically delivered to the market by shuttle tankers, while gas is expected to be sent to shore through a gas pipeline of approximately 85 km long, possibly to the Dos Bocas Station.

An onstream date in 2033 has been assumed for the project, following an appraisal and development campaign. This is an assumed year, and the actual date could be earlier or later. Discounted cash flow valuation analysis is based on S&P Global Vantage's base case oil price scenario (benchmark Brent oil price of USD 82/bbl, adjusted for oil quality and escalated at 2% every year).

The economics for the project presented viable development opportunities with point forward breakeven price of 54 USD/bbl. Strong viable economics are present in the base case of 82 USD/bbl and in the high case of 104 USD/bbl. However, in the low case of 60 USD/bbl the project economics become marginal with small positive NPV10. It is important to note, however, that this is a pre-FID project development concept and there are many unknowns related to technical development choices and no geological risk has been considered.

Wintershall contribution to Mexico production forecast is gaining relevance while the company increases its portfolio in the country through acquisitions and new discoveries. Wintershall's net entitlement production is set to exceed 65,000 boe/d by 2029, as a result of holding interests in the Zama, Polok/Chinwol, and Cholula development projects. With the natural declining of these projects production, if Kan field is developed as estimated, the company's total production could reach an average of 45,000 boe/d in 2036 when Kan field is expected to reach peak production.

Solutions

For more information regarding well, field & basin summaries, please refer to EDIN

For more information regarding asset evaluation, portfolio view, and production forecasts, please refer to Vantage

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.