PTT Exploration and Production Plc (PTTEP), the oil and gas drilling arm of national oil and gas conglomerate PTT Plc, has announced a new oil discovery off the shore of Mexico.
PTTEP and its joint venture partners made two successful deep-water oil discoveries in Block 29 in offshore Mexico, with good quality reservoirs. The commercial potential of the new discoveries will be assessed in the next phase.
Phongsthorn Thavisin, president and chief executive of PTTEP, said the firm operates in Mexico through its wholly owned PTTEP Mexico E&P Co. Its consortium made the discoveries in the Salina Basin.
The discovery comes at a time when offshore drilling is financially infeasible for many companies. With international oil prices hovering around US$20 per barrel, some offshore sites are halting production in the Gulf of Mexico as oil drilling becomes too costly and oil storage capacity reaches its limit.
The prospect of developing new offshore sites would remain impractical until prices significantly rise, said Mr Phongsthorn.
The first exploration well, Polok-1, drilled to a depth of 2,620 metres and encountered 150m of net oil pay, followed by the second exploration well, Chinwol-1, which drilled to a depth of 1,850m and encountered net oil pay of 200m.
He said both exploration wells show promise.
Together with its joint venture partners, PTTEP will be working to obtain approval from the Mexican regulators and preparing appraisal as well as further development plans.
The Polok-1 and Chinwol-1 wells are located in water depths of 583m and 464m, respectively.
The two wells are 88 kilometres from the Mexican coastline of Tabasco. The joint venture partners of this project are PTTEP Mexico E&P Co with 16.67% interest, Repsol Exploracion Mexico, an E&P operator with 30% interest, PC Carigali Mexico Operations, S.A., the Mexican subsidiary of Petronas, with 28.33%, and Wintershall Dea with 25%.
PTTEP has operated in Mexico since 2018, following the company's expansion of investments in petroleum-prolific areas.
PTTEP currently holds two exploration blocks in offshore Mexico -- Block 29 and Block 12, where it has also carried out exploration activities.
Mr Phongsthorn said the continued oil price crisis coupled with the impact of the outbreak of Covid-19 has suppressed domestic energy demand. As a result, PTTEP has revised estimated sales volume in 2020 to 362,000 barrels of oil equivalent per day (BOED), a 7% decrease from the previous target of 391,000 BOED.
PTTEP also reduced its 2020 expenditure by 15-20% from a previous projection of $4.61 billion.
The major spending cuts are from a deferral of some exploration activities and reduction of non-operation related expenses, while keeping maintenance capital expenditure to ensure continuity of the energy supply for the country.
The company will continue its investment in development projects such as Mozambique Area 1 Project, and additional drilling activity in Malaysia, in the Lang Lebah gas field in Block Sarawak SK410B, to ensure initial production of these projects in the next 3-4 years as planned.
"The exploration and production business is being challenged by the oil price crisis," Mr Phongsthorn said.
"During the previous downturn 4-5 years ago, the company successfully restructured its cost structure, making it competitive with our peers."