Benchmark of deepwater field development projects in the Perdido foldbelt: Evaluating fiscal impacts (Mexico, and US) using a nodal analysis production model

Development of Mexican hydrocarbon reservoirs by foreign operators is now made possible by the energy reforms implemented in 2015. This study benchmarks the economic return of deepwater hydrocarbon field development projects located in the Perdido foldbelt at either side of the maritime border between the United States and Mexico to assess the competitiveness of the respective fiscal frameworks. We use a nodal analysis production model to first history match real field performance in the US Perdido project and then forecast production of an analogous, undeveloped field in the Mexican extension of the Perdido foldbelt, Gulf of Mexico. The new Mexican profit sharing contract imposes basic royalties that appear equitable for both the contractor and the government, albeit slightly less attractive than the to the U.S. federal lease terms. The contracts for deepwater assets in Mexico open up commercially viable options, provided the oil price will recover to render such oil projects profitable. Our sensitivity analysis shows that profitable development of 300 MMbbls oil in place becomes possible when oil prices rise above $75/bbl. For larger reservoirs (~900 MMbbls) the profit hurdle rate of 15% is already met for $60/bbl. Any over-royalty offered by a contractor in the bidding process renders the royalties in Mexican operations slightly higher than in the U.S.