The Domino Effect: Mexico’s Trion Asset Unlocks Stranded Value

The concept of hub and subsea tie-back as a field development strategy has played a vital role on the U.S. side of the deepwater Gulf of Mexico (DWGOM) for many years, allowing numerous small, potentially stranded fields to be developed. This infrastructure-led exploration (ILX) is perhaps best exemplified within the U.S. DWGOM and could potentially begin making its way across the border as the Trion development takes shape. Located 28 km south of the United States, on the Mexican maritime border, Trion 1 well was discovered in August 2012 by Pemex. The well is about 180 km off the Tamaulipas coast, in the Deepwater Gulf of Mexico Basin, also known as the Perdido Fold Belt or the Perdido Area. The nearest production hub to Trion 1 well is on the US side of the border, the Shell-operated Perdido Regional Host spar.

Subsea tie-backs as a development concept took a stronghold in the U.S. DWGOM during the oil price collapse in 2014-2015. The large and expensive facilities were struggling to move forward with oil prices in the US$40 per barrel range, leaving only the most economic and efficient projects to bring new oil to market. For several years, almost all new oil production originated from subsea tie-backs to existing facilities. This still appears to be the preferred development route to minimize risk, maximize returns, and shorten payback periods. Just this year, four new discoveries have been added in the U.S. DWGOM, with two of them projected to commence production before 2026. This amounts to 2 or fewer years from discovery to first oil. All are modeled via subsea tie-back and all have stellar economic projections.

On the Mexican side, in March 2017, Pemex partnered with Woodside Energy as operator in a 40% and 60% WI agreement (respectively) to develop Trion field. According to operator's recent announcements, Trion is planned to be online in 2028 and will be developed through a semi-submersible floating production unit (FPU) with an oil production capacity of 100,000 barrels per day. Oil production will be transported via offshore loading system, while part of the gas production will be transported via a new 139.7 km pipeline connected with the Mexican Texas-Tuxpan gas pipeline. If developed as expected, Trion production will reach a plateau rate of about 100,000 b/d in 2030, when production starts diminishing and the FPU will have some available capacity.

The deepwater Perdido area in Mexico is still an exploratory area with valid contract blocks owned by Pemex. The area comprises oil discoveries made by the national oil company in the last decade such as Mirus 1, Maximino 1, Nobilis 1, Supremos 1, Exploratus, Doctus 1, among others. These assets are still on appraisal phases as most of them are currently uneconomical with a standalone platform. As the title suggests, the development of Trion could be the key to unlocking these previously stranded developments in the region with the use of tie-backs connected to the main Trion production unit. A project we call "Maximino Complex" comprising the discoveries Mirus 1, Maximino 1, Nobilis 1 and Supremos 1 appear to be the primary benefactor as its economics improve drastically when the development concept changes from stand-alone to subsea tie-back.

Once infrastructure is in place, agreements between different ownership structures will have to be put in place, such as the FPU itself and existing and new pipelines, in which Pemex appears as the main stakeholder. Following the Maximino Complex tie-back employment, other tie-backs can be developed as the oil and gas production diminishes over the years and new projects can come online to fill the FPU capacity. A scenario is presented in the chart below with the development of Doctus 1 and Exploratus fields. As new discoveries are made, the Trion unit can become a hub contributing not only to the oil production in the country, but also to the development of a new deepwater area.

Renata Machado, Technical Research Associate Director, S&P Vantage®

Isaac Nuti, Technical Research Analyst, S&P 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.