Regulators
Regulation of the E&P Industry The Roll of the National Hydrocarbons Commission
August 2010
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
Energy Reform SENER (Ministry of Energy) Responsabilities
• To execute Nation’s rights related to Hydrocarbons’ topics. • To define production’s platform trajectory.
• Reserves’ restitution definition.
• To authorize exploration and exploitation projects • To approve, refuse, modify, revoke and/or cancel hydrocarbons’ exploration and exploitation grants.
To back up the Ministry of Energy in its new responsibilities, a technical body was created:
CNH Legal Framework Hydrocarbons’ Management Hydrocarbons’ policy definition
Hydrocarbons’ policy implementation
1. To set technical elements to design and define Hydrocarbon’s Policy.
3. To provide technical assessment for E&P projects.
2. To define technical regulation for E&P projects.
4. To supervise regulation observance. 5. To approve Hydrocarbon’s Reserves within the country
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
E&P Regulatory Systems Prescriptive
Prescriptive approach directs oil and gas activities through detailed regulations and requirements. Regulators impose technical standards Brazil, US, China, Indonesia, Malaysia
Performance based
Performance based system requires regulators to get fully involved in each project. It is a case by case assessment. Operators have to be more proactive in the design of their projects. Norway, UK, Australia, Canada
Some regulators adopted a hybrid approach by being prescriptive in areas deemed critical, while also establishing broad performance parameters where the industry needs to meet particular objectives. At the end of the 80’s, countries as Norway and the UK have moved from a prescriptive to a performance based approach.
E&P Regulatory Systems Prescriptive Characteristics
• Need detail regulation and requirements for oil and gas activities. High number of compulsory technical standards • Implies less flexibility in the operations
Operators
Operating plans and environmental impact assessments must still be submitted and approved, but mainly to prove regulatory compliance. Approvals are generally granted more quickly
Regulators
Regulators play an active role setting the requirements for the operators and enforcing the technical standards
E&P Regulatory Systems Performance based Characteristics
• Based on government and industry objectives. • Demands extensive participation from industry, employees and regulator in terms of expertise, management and flexibility • Regulation of business emphasizes efficiency rather than maximum oversight
Operators
Operators must prove they have identified the technology, methods, risks and equipment that meet the objectives (or statutory obligations).
Regulators
The regulators must set the objectives and keep abreast of and participate in developing and revising the industry standards. Supervision could involve whether the administrative management systems at the companies ensure acceptable operation
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
CNH Approach Regulation hybrid approach towards Performance Based – Case Assessment 3 Tier Strategy 1
Internal standards of Pemex
2
Design specific regulation
3
Technical assessment of the E&P projects
ACTIONS Assess all the E&P to: • Revise the internal standards and procedures of Pemex, as well as the management systems to enforce them. • Introduce specific technical regulation. • Provide technical assessments and follow up.
Regulation is complemented with supervision, inspections (and drilling permits, when required).
Internal standards of Pemex
Pemex/CNH
CNH
Right now, together with Pemex, CNH evaluates the internal standards and procedures, as well as identify the lack of them.
In a few months, CNH will issue mandatory requirements to Pemex to develop a set of specific internal technical standards and procedures . The internal standards and procedures will have to be submitted to CNH for its consent.
Design specific regulation
CNH
On top of Pemex internal standards and procedures, CNH is in the process of identifying which specific regulation will be required. CNH is closely following recent international developments in this regard.
Examples of regulatory elements that are under study Technical aspects: • Introduction a double shear ram in blowout preventers. Procedures: • Third party verification in BOPs and emergency systems. • Double key authorization in critical procedures Management: • Requirements to estimate and control worst case oil-spill discharge volumes
Technical assessment of the E&P projects
SENER-CNH
CNH
Recently, together with the Ministry of Energy, CNH moved forward the deadline in which Pemex has to submit its deep water projects for technical assessment. CNH will provide technical assessment on the following aspects: • Selection and evaluation of technologies • Performance indicators • Identification and evaluation of risks (safety) • Selection and evaluation of metering equipment • Gas flaring • Economic evaluation
By doing a detail assessment project by project, the CNH will also:
Be able to characterize all the oil and gas resources of the country. Have a solid support to define strategies for the National Hydrocarbons policy. Analyze if Pemex has identify and assess all relevant risks, if so, if Pemex has created the procedures to respond to accidents and emergencies. If not, help them identifying and create procedures. Set the technical regulation according to the real circumstances of the projects.
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
Mexican E&P Outlook
Mature fields
Exploration Hydrocarbons Policy
High technical fields
Mexican E&P Outlook Mature fields Status of oil and associated gas fields**
Size* Supergiant Giant Big Medium Small Total
Declining 1 5 44 32 62 144
Plateau 0 2 8 7 16 33
Development Total 0 1 0 7 3 55 7 46 36 114 46 223
*Size: Supergiant original 2P reserves > 5,000 MMBPCE; Giant > 1,500 MMBPCE; Big > 250 MMBPCE; medium > 80 MMBPCE. ** Status: Declining if production is less than 85% of the max; plateau if production reached its peak but hasn’t declined more than 85% of the peak.
México has 223 oil and associated gas fields with production and reserves, from which 177 are already declining or will be in the next 2 years. From the 46 fields in development, 29 are Chicontepec fields.
Mexican E&P Outlook High technical fields: Chicontepec
Go lf o d e México
Veracru z
Hid alg o
Pu eb la
Large reserves but big technical challenge
Mexican E&P Outlook Exploration World’s sedimentary basins with 2,000 exploratory wells in the last 25 years
SOURCE: Article by Leonardo Maugeri, Scientific American.
In the whole country, PEMEX has drilled 1,228 exploratory wells in the last 25 years.
180
160
140
1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Mexican E&P Outlook
Exploration
Exploration wells
4,844 Wells 80%
120
100
Located with no 3D seismic
80
Old technology
60
40
20
0
Mexican E&P Outlook Exploration: Prospective Resources (MMMOBE) 56.6 MMMOBE 43.8 MMMOBE
Depth (m)
Offshore 43.8
Deep Waters 27.7 MMMBOE Onshore 12.8
Total
19.7
> 1,500
3.7 4.3
1,000 – 1,500 500 – 1,000
16.1
< 500
Offshore
Onshore and Offshore shallow waters(< 500 m) resources account for 51% of total prospective resources (28.9 MMMBOE).
Mexican E&P Outlook Exploration: Not explored areas (subsalt province)
Reynosa 1
Subsalt Belt
Plegado Perdido Belt
Poza Rica
Salt Gulf Province Veracruz
0 Cd. Carmen
100 km
200
300
August 2010
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
Energy Reform SENER (Ministry of Energy) Responsabilities
• To execute Nation’s rights related to Hydrocarbons’ topics. • To define production’s platform trajectory.
• Reserves’ restitution definition.
• To authorize exploration and exploitation projects • To approve, refuse, modify, revoke and/or cancel hydrocarbons’ exploration and exploitation grants.
To back up the Ministry of Energy in its new responsibilities, a technical body was created:
CNH Legal Framework Hydrocarbons’ Management Hydrocarbons’ policy definition
Hydrocarbons’ policy implementation
1. To set technical elements to design and define Hydrocarbon’s Policy.
3. To provide technical assessment for E&P projects.
2. To define technical regulation for E&P projects.
4. To supervise regulation observance. 5. To approve Hydrocarbon’s Reserves within the country
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
E&P Regulatory Systems Prescriptive
Prescriptive approach directs oil and gas activities through detailed regulations and requirements. Regulators impose technical standards Brazil, US, China, Indonesia, Malaysia
Performance based
Performance based system requires regulators to get fully involved in each project. It is a case by case assessment. Operators have to be more proactive in the design of their projects. Norway, UK, Australia, Canada
Some regulators adopted a hybrid approach by being prescriptive in areas deemed critical, while also establishing broad performance parameters where the industry needs to meet particular objectives. At the end of the 80’s, countries as Norway and the UK have moved from a prescriptive to a performance based approach.
E&P Regulatory Systems Prescriptive Characteristics
• Need detail regulation and requirements for oil and gas activities. High number of compulsory technical standards • Implies less flexibility in the operations
Operators
Operating plans and environmental impact assessments must still be submitted and approved, but mainly to prove regulatory compliance. Approvals are generally granted more quickly
Regulators
Regulators play an active role setting the requirements for the operators and enforcing the technical standards
E&P Regulatory Systems Performance based Characteristics
• Based on government and industry objectives. • Demands extensive participation from industry, employees and regulator in terms of expertise, management and flexibility • Regulation of business emphasizes efficiency rather than maximum oversight
Operators
Operators must prove they have identified the technology, methods, risks and equipment that meet the objectives (or statutory obligations).
Regulators
The regulators must set the objectives and keep abreast of and participate in developing and revising the industry standards. Supervision could involve whether the administrative management systems at the companies ensure acceptable operation
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
CNH Approach Regulation hybrid approach towards Performance Based – Case Assessment 3 Tier Strategy 1
Internal standards of Pemex
2
Design specific regulation
3
Technical assessment of the E&P projects
ACTIONS Assess all the E&P to: • Revise the internal standards and procedures of Pemex, as well as the management systems to enforce them. • Introduce specific technical regulation. • Provide technical assessments and follow up.
Regulation is complemented with supervision, inspections (and drilling permits, when required).
Internal standards of Pemex
Pemex/CNH
CNH
Right now, together with Pemex, CNH evaluates the internal standards and procedures, as well as identify the lack of them.
In a few months, CNH will issue mandatory requirements to Pemex to develop a set of specific internal technical standards and procedures . The internal standards and procedures will have to be submitted to CNH for its consent.
Design specific regulation
CNH
On top of Pemex internal standards and procedures, CNH is in the process of identifying which specific regulation will be required. CNH is closely following recent international developments in this regard.
Examples of regulatory elements that are under study Technical aspects: • Introduction a double shear ram in blowout preventers. Procedures: • Third party verification in BOPs and emergency systems. • Double key authorization in critical procedures Management: • Requirements to estimate and control worst case oil-spill discharge volumes
Technical assessment of the E&P projects
SENER-CNH
CNH
Recently, together with the Ministry of Energy, CNH moved forward the deadline in which Pemex has to submit its deep water projects for technical assessment. CNH will provide technical assessment on the following aspects: • Selection and evaluation of technologies • Performance indicators • Identification and evaluation of risks (safety) • Selection and evaluation of metering equipment • Gas flaring • Economic evaluation
By doing a detail assessment project by project, the CNH will also:
Be able to characterize all the oil and gas resources of the country. Have a solid support to define strategies for the National Hydrocarbons policy. Analyze if Pemex has identify and assess all relevant risks, if so, if Pemex has created the procedures to respond to accidents and emergencies. If not, help them identifying and create procedures. Set the technical regulation according to the real circumstances of the projects.
Content I. Scope of the CNH
II. International Regulatory Systems for E&P III. The CNH Approach IV. Mexico’s E&P outlook
Mexican E&P Outlook
Mature fields
Exploration Hydrocarbons Policy
High technical fields
Mexican E&P Outlook Mature fields Status of oil and associated gas fields**
Size* Supergiant Giant Big Medium Small Total
Declining 1 5 44 32 62 144
Plateau 0 2 8 7 16 33
Development Total 0 1 0 7 3 55 7 46 36 114 46 223
*Size: Supergiant original 2P reserves > 5,000 MMBPCE; Giant > 1,500 MMBPCE; Big > 250 MMBPCE; medium > 80 MMBPCE. ** Status: Declining if production is less than 85% of the max; plateau if production reached its peak but hasn’t declined more than 85% of the peak.
México has 223 oil and associated gas fields with production and reserves, from which 177 are already declining or will be in the next 2 years. From the 46 fields in development, 29 are Chicontepec fields.
Mexican E&P Outlook High technical fields: Chicontepec
Go lf o d e México
Veracru z
Hid alg o
Pu eb la
Large reserves but big technical challenge
Mexican E&P Outlook Exploration World’s sedimentary basins with 2,000 exploratory wells in the last 25 years
SOURCE: Article by Leonardo Maugeri, Scientific American.
In the whole country, PEMEX has drilled 1,228 exploratory wells in the last 25 years.
180
160
140
1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Mexican E&P Outlook
Exploration
Exploration wells
4,844 Wells 80%
120
100
Located with no 3D seismic
80
Old technology
60
40
20
0
Mexican E&P Outlook Exploration: Prospective Resources (MMMOBE) 56.6 MMMOBE 43.8 MMMOBE
Depth (m)
Offshore 43.8
Deep Waters 27.7 MMMBOE Onshore 12.8
Total
19.7
> 1,500
3.7 4.3
1,000 – 1,500 500 – 1,000
16.1
< 500
Offshore
Onshore and Offshore shallow waters(< 500 m) resources account for 51% of total prospective resources (28.9 MMMBOE).
Mexican E&P Outlook Exploration: Not explored areas (subsalt province)
Reynosa 1
Subsalt Belt
Plegado Perdido Belt
Poza Rica
Salt Gulf Province Veracruz
0 Cd. Carmen
100 km
200
300
