Latin America’s two biggest oil companies are betting big on a high-risk effort to unlock a vast trove of crude from rocks that haven’t seen the light of day in 160 million years.
Petroleo Brasileiro and Petroleos Mexicanos have teamed up to probe a layer of the Earth’s crust beneath the Gulf of Mexico that’s older, deeper and potentially richer in oil than the world’s existing mega-fields. The physical, financial and environmental risks are enormous given the challenges inherent in drilling for crude miles under the sea floor through unstable, high-pressure shelves of stone.
The target is a geologic cluster off the coast of Mexico’s Campeche state that Pemex explored without success in 2018. It stands in stark relief to the gushers on the US side of the Gulf that pump oil trapped within rocks laid down roughly 20 million years ago. Instead, Petrobras and Pemex are seeking to delve into stone formations that are eight times as old, from an era when dinosaurs and ancient mollusks dominated the land and the seas.
For Pemex, it’s a Hail Mary shot at revitalization as it grapples with smothering debt, shrinking oil output and a reputation for inefficiency and danger. But the effort matters to global oil markets, too, as the Iran war and other geopolitical disruptions in the Mideast have laid bare the peril of having so much supply concentrated in a single region.
The incentive for drilling into the older formations is that they potentially hold a far bigger payday because they’re the so-called source rock, where organic detritus was crushed, cooked and transformed into petroleum. In contrast, the younger stones are just pockets where leaks from the source rocks got trapped over time.
Teams from both companies began assessing seismic and other geologic data in recent weeks with an eye toward accomplishing a feat that’s never been done outside of Petrobras’ home territory of Brazil.
“Petrobras is entering uncharted territory,” said Pedro Zalan, a geologist who worked on exploration projects during a 34-year career at the company. The geology on the Mexican side of the Gulf “makes it particularly favorable for oil accumulation.”
Petrobras is uniquely adept at probing source rocks in a layer of the crust that geologists call the pre-salt. A series of gigantic, offshore discoveries near Rio de Janeiro starting in 2006 ushered in a transformative boom in pre-salt oil production for South America’s biggest economy. Subsequent bids by other companies to duplicate those successes in pre-salt formations in Angola, Gabon and the Republic of Congo largely fizzled.
“Pemex alone doesn’t have the technology or the capital for this kind of play,” said Mark Rowan, a Colorado-based geologist and consultant who specializes in deep Gulf of Mexico discoveries. “But just because it’s high risk doesn’t mean the hydrocarbons aren’t there. Companies are willing to drill very risky prospects and be first movers because the potential rewards, if successful, are enormous.”
In 2018, Pemex bored more than 7,800 meters (25,600 feet) below the sea floor and penetrated the Campeche salt layer. Although the exploratory well was declared unproductive, in industry parlance that’s not necessarily synonymous with useless. The data and insights extracted from that well may yield valuable clues for the Petrobras and Pemex geologists and engineers.
“Apparently what Pemex found did not scare them away,” Rowan said. “That suggests there was no absolute play-killer, and possibly something that gave them real reason to keep testing.”
Even if there is oil under the salt, getting it to the surface will prove challenging. Salt acts more like a liquid than a solid under high temperature and pressure deep underground, and penetrating it requires specialized equipment and techniques.
The wells must also prove economically viable, and deepwater drilling can easily cost upwards of hundreds of millions of dollars per well.
In addition to exploring the pre-salt zone, the companies plan to search beneath sedimentary rocks formed by mud and sand avalanches miles below the sea surface, as well as under younger, shallower salt formations, Petrobras’ head of exploration and production Sylvia Anjos said during an Aug. 7 media briefing.
Supermajors including Chevron Corp. and Shell Plc have been pumping crude from so-called sub-salt fields for more than 30 years. And although those reserves are under very deep water and present their own list of hazards, drilling the much older pre-salt resources being pursued by Petrobras and Pemex is on another level of complexity and risk.
A find on par with the Tupi field Petrobras discovered in 2006 would represent the most significant development for Pemex in its 88-year history. It would help achieve the goal of successive Mexican presidents and Pemex CEOs of revitalizing production at what was once the nation’s economic crown jewel.
In Brazil, tapping the pre-salt reserves triggered a surge in crude output that turned an economy largely reliant on agricultural exports into a hemispheric energy superpower.
Tupi alone has given up 4 billion barrels of crude since it came online in 2010. That’s more than $300 billion in economic value, based on average international oil prices over that timespan.
“So much depends on what the data from Pemex’s 2018 pre-salt well actually shows, and they’ve kept the results of that study a guarded secret,” said Jon Blickwede, geologist and owner of Houston-based Teyra GeoConsulting. “If Pemex found any hydrocarbon shows, either gas or oil, under the salt, it would be extremely significant.”