Informe de Pemex PEP 2014

1. PEMEX Investor Day London – October 29, 2014
Next Steps for the Successful and
Sustainable Development of Mexico’s
Most Promising Resources
Gustavo Hernández-García
PEMEX-Exploration & Production General Director

2. Content
Energy Reform in the context of Mexico´s transformation
agenda
PEMEX´s Partnership Strategy
Initiative of Migration of current service Contracts to the
new E&E Contracts
Farm Outs
Round One
1

3. Private
participation
Regulators
Changes to
PEMEX
Description
• The State retains ownership of sub-surface hydrocarbons
• Private ownership of hydrocarbons at wellhead conditions is allowed
• Four types of E&E contracts to be considered: service contracts, profit sharing,
production sharing and licenses
• SENER (Ministry of Energy) will define areas to be tendered and create model
contracts
• CNH (National Hydrocarbons Commission) will execute tender process and will
manage contracts with bidders
• SHCP (Ministry of Finance) will define fiscal terms of contracts (royalties, tax rates,
etc.)
• PEMEX will have budgetary autonomy
• Its organization and structure will be based on international best practices
• More freedom regarding procurement will be allowed
Key Reform Elements for Upstream
Source: SENER 2

4. Content
Energy Reform in the context of Mexico´s transformation
agenda
PEMEX´s Partnership Strategy
Initiative of Migration of current service Contracts to the
new E&E Contracts
Farm Outs
Round One
3

5. Optimal
• Keep core assets
• Strategic growth (DW and unconventional)
• A balanced E&E portfolio
The Benefits of Round Zero
Size of portfolio
Business
complexity
Too big
• Limited options for growth
• Inability to meet goals
• Unavoidable production
decline
+
-
- +
• Complexity to prioritize
• Difficulty reaching efficiency
• Financial resources
restricted
• Size reduction is needed
Too small
4

6. Developing a Significant Amount of Resources
4.2,
17%
20.6,
83%
State
PEMEX
Mexico’s 2P Reserves:
24.8 Bboe
Mexico´s Prospective Resources:
112.8 Bboe 1
PEMEX will increase efficiency taking advantage of the existing infrastructure
These resources will allow PEMEX an organic growth
89.4
23.4
1. Include Conventional and Unconventional Resources
89.4,
79%
23.4,
21%
State
PEMEX
It represents 93
percent of
Proved Reserves
5

7. PEMEX will transform itself to be able to compete and
maintain a leading position in a competitive landscape…
• Be the best investment option for the
monetization of Mexico’s hydrocarbon
resources and national development
• Continue to be one of the industry leaders
• Fast transformation to compete and
capture opportunities in an environment
with increasing technical complexity
• Strategic partnerships aimed at
maintaining PEMEX’s relevant position
PEMEX expectations post-Reform
• Human resources excellence
• Value-driven capital allocation
• Excellence on HSSE and Social
Responsibility performance
• Aggressive partnership
• Develop capabilities for complex projects
Strategic themes for E&E
6

8. JVs and JOAs hold 35% of Contracted Acreage and 71% of Total Reserves
PEMEX maintaining its leadership through JVs
Source: IHS 7

9. • A farm-out process will be implemented for select fields assigned to PEMEX in
Round Zero
• The farm-outs will enable the development of fields with high technical
complexity or high CAPEX requirements which otherwise would remain
underutilized
• Under the new legal framework, the existing contracts with the corresponding
contractors will be migrated into EEC
• By improving fiscal terms, contractors will gain access to additional resources,
currently classified as prospective or contingent, hence enhancing the reserves
and production for the contractor as well as earnings and taxes for the State
• PEMEX will develop technical and organizational capabilities to compete for
new blocks
• Capabilities acquired will allow to improve PEMEX’s position to compete for
blocks in future bidding rounds
Establish partnerships for
selected assigned fields to
PEMEX in Round Zero
Migrate the current E&P
Service Contracts (FPWC1
and EPIC2) into Exploration
and Extraction Contracts
(EEC)
Position PEMEX for
partnerships
in next rounds
PEMEX strategy in partnerships is focused on three
main major objectives
1. FPWC. Financed Public Work Contracts
2. EPIC. Exploration and Production Integrated Contracts
8

10. The span of ~14 month which started after the enactment of
the Reform will be key in the transition to an open market
Activity
2014 2015
Comments
08 09 10 11 12 01 02 03 04 05 06 07 08
PEMEX partnerships
Round One and subsequent
Round Zero results and
Round One publication
Definition of assets awarded to PEMEX and
assets to be tendered in Round One
Round One feedback
FPWC & EPIC Migration
Publication of terms and
conditions
Publication of model contracts between
Mexican State and operators
Terms and conditions
feedback
Bidding process and data
Room access
Bidders allowed to participate in the bidding
process. The ITT’s will be available by
phases according the type of play
Bidding process and
decision
Bidders submit proposals and bidding
process is undertaken
Mexico’s upstream sector future detailed timeline
1st stage 2nd stage
Shallow waters Extra-heavy oil Unconventional and Chicontepec Onshore Deepwater
Source: SENER 9

11. Upstream
Natural Gas and
Midstream
Description
• Cooperation in academic, scientific, technical and business areas, related to deepwater
projects, revitalization of mature fields, offshore extra-heavy oil fields, and others
upstream activities
• Exchange of experiences and best practices through visits, conferences and workshops
• Evaluation and cooperation regarding national and international business opportunities
of mutual interest
• Identification and analysis of possible joint cooperation opportunities on the development
of natural gas processing, transportation and storage projects, as well as liquefaction
and regasification facilities;
• Exchange of experiences and best practices through visits, conferences and workshops
• Evaluate areas of common interest and cooperation related to the marketing and trading
of products in international markets;
• Develop exchange programs of specialists through training programs
PEMEX intends to establish a cooperation framework with a number of
entities, through MOUs and/or Collaboration Agreements (CAs)
Source: SENER
This strategy is aimed at exchanging technical knowledge, information, experiences, and practices
regarding oil & gas opportunities
Activities
10

12. Safety &
Environmental
Human Capital
Description
• Exchange of best practices related to industrial safety and health at work
• Exchange experiences and best practices on the development and use of technology to
reduce greenhouse emissions and on sustainability initiatives
• Cooperating and exchanging knowledge and experiences on the design and creation of
learning and training programs that encourage human capital specialization, facilitating
exchanges of professionals, technicians and specialists including study visits on agreed
matters of interest, as well as exchange of best practices on talent management
• Organizing joint conferences, seminars, workshops, meetings, training sessions,
outreach and educational programs
• Facilitating the relationship amongst representatives of academia, industry and
government to promote best practices and technical solutions to matters of common
interest to the Parties; engaging in such other activities as the Parties consider
appropriate
PEMEX intends to establish a cooperation framework with a number of
entities, through MOUs and/or Collaboration Agreements (CAs)
Source: SENER
• MOUs and CAs constitute an expression of non-binding intent and are not intended to create, nor shall it be
deemed to create, any legally binding obligations enforceable between the Parties
Activities
11

13. General
Purpose
Agreements
MOUs
Collaboration
Agreements
Cooperation
Agreement
Upstream
PEMEX intends to establish a cooperation framework with a number of
entities, through MOUs and/or Collaboration Agreements (CAs)
12

14. Northern Region
Marine Regions
Southern Region
Pemex has diverse infrastructure strategically distributed
along the different regions across the country
258 platforms
1 FPSO, 1 FSO
41,577 km of pipelines
1 Storage terminal
773 production facilities
9,449 operating wells
13

15. Short Term
Medium Term
Long Term
New era in Mexico presents significant opportunities
to grow
2.6-3.0
• Round Zero
• E&E Contracts
• Round Zero plus future
Rounds
• E&E Contracts
 Extra-heavy oil
 Unconventional
 Chicontepec
• Round Zero plus future
Rounds
• E&E Contracts
 Extra-heavy oil
 Unconventional
 Chicontepec
 Deepwater
Million barrels per day
2.4-2.6
2.3-2.4
14

16. The State decision to grant resources in
deepwater and shale areas allows PEMEX
to diversify its portfolio of E&P projects as
well as to improve capabilities to compete
and develop additional areas in the future
15

17. Content
Energy Reform in the context of Mexico´s transformation
agenda
PEMEX´s Partnership Strategy
Initiative of Migration of current service Contracts to
the new E&E Contracts
Farm Outs
Round One
16

18. Migrationinitiative
Results
Background
E&P Service Contracts
were created to promote
private capital investment
in key assets
25 to 35 years term
including exploration,
development and production
• Fee per barrel plus partial
cost reimbursement
• Minimum CAPEX
commitment
• Contracts were tendered
using the fee per barrel as
the bid awarding variable
Three rounds of EPIC
were held with mixed
results
South Region mature
fields: Two of the three
tendered areas created
widespread interest, all of
them were awarded
• North Region mature
fields: One of the six
tendered areas failed to
create widespread
interest; the area was not
awarded
• Chicontepec tight plays:
All of the six tendered
areas were awarded
Given the new
legislation, FPWC &
EPIC will be migrated
to joint ventures
between PEMEX and
operators, with E&E
Contracts with the
State
Asset valuation and JV
model creation
• Negotiation and
agreement between
PEMEX and operator
• Authorization and
signing of E&E
Contract
An initiative, already in progress, is related to the migration
of E&P Service Contracts into the new E&E Contracts
17

19. 11 E&P Service Contracts will be migrated within the
next 6 months
Asset Fields
Years under
contract
execution
Area
(km2)
2P Reserves
(MMBBOE)
3P Reserves
(MMBBOE)
Resources
(MMBBOE)
Production
(As of may 2014)
Investment
(USD MM)
Oil
(MBD)
Gas
(MMCFD)
2013
2014-
2015
Cinco
Presidentes
Magalla
nes
2.7 169 36 93 - 7.4 10 138 133
Bellota-Jujo
Santua
rio
2.7 130 41 41 - 8.0 4 200 133
APPRA Altamira 1.8 1,625 6 13 13 2.1 0 50 72
APPRA Arenque 1.6 2,035 66 82 994 5.4 0 241 215
APPRA Pánuco 1.8 1,839 29 37 132 1.6 8 155 331
APPRA San Andrés 1.8 209 202 531 100 3.2 0 86 177
APPRA Tierra Blanca 1.8 358 36 60 37 1.4 0 137 103
Burgos Nejo 7.3 1,165 32 44 - 9.9 210 450 602
Burgos Olmos 10.5 358 13 45 - 0.0 3 20 108
Burgos Misión 10.6 1,972 68 81 - 0.0 110 110 179
APPRA Ébano 10.9 1,584 40 56 - 0.3 0 249 575
Total 11,444 569 1,083 1,276 39 345 1,836 2,628
Burgos
APPRA
Bellota-
Jujo
Nejo
Misión
Olmos
Ébano
Panuco
San Andrés
Altamira Aranque
Tierra Blanca Magallanes
Santuario
Cinco
Presidentes
18

20. Asset Field
Years under
contract
execution
Area
(km2)
2P Reserves
(MMBOE)
3P Reserves
(MMBOE)
Resources
MMBOE)
Production Historical
investment
(USD MM)
Oil
(MBD)
Gas
(MMCFD)
Burgos Pirineo1 9.3 3,840 11 16 - 0 24.3 525.5
Burgos Cuervito1 10.6 231 58 68 - 0.65 30.6 311.1
Burgos Fronterizo1 10.6 231 31 35 - 0.41 26.6 270.4
Burgos Monclova1 7.3 3,358 3 4 - 0 17.9 490.6
ATG Amatitlán 0 230 368 929 252 0.1 0.1 -
ATG Miahuapan 0 128 88 279 101 0.3 0.4 -
ATG Miquetla 0.7 112 195 224 86 0.9 2.5
ATG Pitepec 0.1 230 440 1,049 252 0.1 0.1 -
ATG Humapa 0.7 128 260 503 157 1.1 2.1 -
ATG Soledad 0.7 125 179 281 128 3.4 8.1 -
Samaria Carrizo2 2.4 13 6 51 - - - -
Total 8,626 1,639 3,439 976 7 113 1,598
11 additional E&P Service Contracts will be updated
during the second stage
1. Oil production is referred as condensate production
2 Suspended
19

21. Content
Energy Reform in the context of Mexico´s transformation
agenda
PEMEX´S Partnership Strategy
Initiative of Migration of current service Contracts to the
new E&E Contracts
Farm Outs
Round One
20

22. The JV process could occur within a wide variety of assets
such as mature fields, extra-heavy oil and deepwater (1/2)
Fields Description
Rodador • Onshore fields producing for more than 10 years
Ogarrio • Require secondary-recovery and improved-recovery methods
Cárdenas – Mora • Access to capital to accelerate hydrocarbons recovery
Samaria (Tertiary)
Mature onshore
Mature offshore
(shallow waters)
Assets considered for partnership with PEMEXAsset group
(approximate location)
Bolontikú • Shallow water fields
Sinán • Producing fields for more than 10 years
Ek (UOJ)
• Require secondary-recovery and improved-recovery methods
• Access to capital to accelerate hydrocarbons recovery
21

23. The JV process could occur within a wide variety of assets
such as mature fields, extra-heavy oil and deepwater (2/2)
Assets considered for partnership with PEMEX
Fields Description
Ayatsil • Shallow water fields close to the Ku-Maloob-Zaap complex
Tekel • Extra-heavy oil in the range of 6.5 to 13.5° API.
Utsil • Ayatsil field under development. First production in the 4Q-2014
Kunah
• Non-associated gas fields located southward the Mexican GOM
• Water depth lower than 2,000 meters
• Undeveloped fields
Piklis
• Close to the Lakach field, the first Mexican gas field developed
in deepwater
Extra-heavy oil
Asset group
(approximate location)
Trión
• Light oil fields located at the Perdido Area in deepwater of the
Mexican GOM
Exploratus
• Water depth greater than 2,500 meters
• Undeveloped fields
Maximino
Deepwater gas
Deepwater oil
22

24. Ministry of Energy
(SENER)
National
Hydrocarbons
Commission
(CNH)
Ministry of
Finance (SHCP)
Roles and responsibility
• Approves migration of assignments to E&E Contracts
• Select areas for bidding processes
• Develop technical design of exploration and extraction contracts and guides to execute bidding
processes for areas
• Define prequalification criteria
• Participates in promotion events
• Prepare data rooms
• Issue bidding packages
• Execute bidding processes for fields and areas
• Subscribes the contract representing the State
• Management of exploration and production contracts with O&G companies
• Establish fiscal terms and economical conditions (royalties, taxes, etc.) of exploration and
extraction contracts
• Defines bidding award variables
The Energy Reform has defined new roles for key
authorities which set policies and rules in the sector
Authority / Company
Authorities responsibilities
23

25. Select JVs areas
• Determine areas that will be migrated to E&E contracts
• Determine whether PEMEX intends to have a sole operatorship role in the
contract or a partnership strategy
According to the law, PEMEX will have key responsibilities in
this process to ensure success in building JV partnerships
Assignment Migration with Partners
• Request to SENER to formally migrate entitlements to Exploration and
Extractions contracts
• Prepare favorable opinion on technical, financial, execution and experience
elements that legal entities should comply and be converted to technical criteria
to be used in SENER’s bidding process
• Opinion on prequalification of partners in the bidding processes to be executed
by CNH
Request migration
Favorable Opinion on
technical elements,
etc.
Opinion on candidate
prequalification criteria
24

26. Content
Energy Reform in the context of Mexico´s transformation
agenda
PEMEX´s Partnership Strategy
Initiative of Migration of current service Contracts to the
new E&E Contracts
Farm Outs
Round One
25

27. Shallow water
Strategy
• Access additional areas to complement portfolio to take advantage of technical and
operational knowledge and existing infrastructure
Round One will focus heavily on partnerships for
technology and execution capacity
Opportunities
Assets up for tender under Round One
Extra-heavy oil • Develop clusters to take advantage of existing infrastructure
Unconventional
and Chicontepec
• Oil and rich gas areas
• Existing infrastructure
Onshore • Management of mature fields through improved processes and existing infrastructure
Deepwater
• Frontier exploration to diversify PEMEX portfolio
• Access to low risk areas
26

28. Both PEMEX and Partners can benefit from a JV in
Round Zero and Round One assets (1/2)
Expected value proposition from partners in a JV
Strategic Objectives
• Accelerate development of deepwater, extra-heavy oil and unconventional
projects
• Improve financial returns
• Gain access to new markets
• Acquire new technical and operational capabilities
• Minimize/share risk
• Improve project management and supply chain management skills in
complex projects and new plays
27

29. Why Mexico?
• Mexico is the 9th world oil producer with a
large and diversified endowment of resources
• Mexico is a country integrated to the global
dynamics, with a high diversity of international
trade agreements and member of the NAFTA.
Free flow of people and goods
• Existing local supplier base and proximity to
one of the more sophisticated supply industry
hubs in the world
• Macroeconomic and political stability for
investments
Why PEMEX?
PEMEX is a well established operator with long
history, good track record and experience, as
well as:
• Unparalleled understanding of the country’s
geology
• Knowledge of domestic E&P regulation
• Existing production infrastructure to expedite
commercializing
• Well established supply chain
• Expertise in stakeholder and community
management
Both PEMEX and Partners can benefit from a JV in
Round Zero and Round One assets (2/2)
28

30. Investor Relations
(+52 55) 1944-9700
ri@pemex.com
www.ri.pemex.com