Pemex Makes Gas Discoveries in the Sabinas Basin

Pemex has made two important gas discoveries in the Sabinas Basin: Pirineo-1 and Forastero-1.

The Forastero-1 well was completed as a gas discovery in February 2004. The well is located approximately 47 km to the north of Monclova, Coahuila. A production test from an undisclosed interval within the Upper Jurassic La Casita Formation yielded 6 MMCFG/D (probably sour gas) with 6,000 psi on 8/64" choke.

The Pirineo-1 well was drilled about 23 km northeast of Forastero-1 and was completed as a sour gas discovery in September 2003. Pemex tested 12.7 MMCFG/D and 2,000 ppm H2S on a 26/64" choke. The tested interval 1941-2330 meters is within Lower Cretaceous La Virgen dolomites and fractured limestones. Reserves are estimated to be 176.5 BCFG.

These exploratory wells comprise part of Pemex's ambitious exploration program for the Sabinas Basin and Piedras Negras area northeast of Sabinas Basin which included a US$56.3 MM exploration budget in 2003 in the under-developed gas-producing area. Planned activities include the acquisition of 7,000 km of 2D seismic data, re-processing of 12,000 km 2D seismic data and acquisition of 3,160 square kilometers of new 3D seismic data in order to evaluate 22 existing prospects.

The Sabinas Basin produces non-associated, thermogenic gas from Upper Jurassic and Cretaceous reservoir rocks. Three fields--Monclova-Buena Suerte, Lampazos, and Merced-- produced more than 340 BCF of dry gas between 1975 and 1996 and represent 97% of the total basin production. Seventy-four development wells have been drilled of which forty-four (44) wells are currently producing and 500 BCF of remaining reserves in these three fields are probable.

Exploration in the Sabinas basin began in the 1930's. The first commercial gas production, however, was not established until 1975, with the discovery of the Buena Suerte field. Pemex suspended exploration activities in the 1970's due to high drilling costs, rapid decline in production rates and the discovery of the giant Campeche Sound fields in southern Mexico.

Since 2001 Pemex has initiated an evaluation of undiscovered gas potential of the Sabinas Basin-Piedras Negras area. Pemex is evaluating the basin's main petroleum systems, The La Casita and La Virgen, as well as the potentially productive La Peña-La Peña and the Eagle Ford-Austin Chalk formations for a total of 15 individual reservoirs objectives.

Drilling depths in the Sabinas basin vary from 1800 to 4500 meters. The average gas rate per well is 4 to 6 MMCF/D, and initial flow rates of 16 MMCFG/D are not uncommon. Production in the basin peaked in 1979 at 160 MMCF/D. Between 1984 and 1991 production in the Monclova-Buena Suerte and Lampazos Fields stabilized at 11 MMCFG/D. With the development of the Merced Field in 1995 production increased to about 60 MMCFG/D but had decreased to 18MMCFG/D by 2000.

The Sabinas basin was initially considered for Multiple Services Contracts by Pemex but was apparently deferred due to internal exploration interest that leads to the Pirineo and Forastero discoveries.

The Sabinas basin lies southwest of the Burgos basin which has attracted significant international interest as Pemex has begun opening the basin to investment through competitive Multiple Services Contracts (MSC). The first three of an anticipated seven MSC's was awarded to Spanish oil company Repsol YPF in mid-October and involves a US$2.44 billion investment in the Burgos basin's Reynosa-Monterrey block. A second award for works and services was announced October 23, 2003 to a consortium led by the Brazilian company Petrobras for over US $260 million on the Cuervito Block which should yield more than 100 wells over the life of the 15-year contract. A third MSC was granted in late October to a Mexican-Argentine consortium for US$1 billion on the Misión Block that comprises 21 separate gas fields.

Arthur Berman