Mexico’s ambitious Energy Reform has opened opportunities for private companies to work together with the Mexican government and geoscientists to develop resources in a way that will result in prudent reservoir development as well as providing needed capital for ongoing development. Welcome to an interview with Read Taylor, founding member and board member of Sierra Oil and Gas, which made one of the top ten discoveries in the last 10 years in the offshore Sureste Basin Zama 1.
What is your name and your relationship to the energy industry?
Read B. Taylor is currently Executive Vice President-Upstream at Sierra Oil and Gas where he is a founding partner and Board Member. Since 2014 Read led the efforts building Sierra’s extensive portfolio of 6 high potential assets in the offshore Mexico Sureste Basin including the 2017 Giant Zama discovery. In the Sureste Sierra currently holds acreage equivalent to over 2.3MM acres (400 GOM Size Blocks) in this newly emerging high potential offshore Basin.
Read has over 25 years experience in International Exploration, Development, Commercial, M&A and New Ventures success. Read has worked extensively in foreign offices including, Brasil, Indonesia, Thailand and China for large Independents UNOCAL , Devon, and Anadarko as well as working in capital markets energy-related roles for several small oil and gas and mining startups.
Read has Bachelor’s and Master’s degrees in Geology, Geophysics and International Business from Pepperdine, University of Southern California, and Harvard. Read is also the Chairman of RICE International Relief Organization a humanitarian relief group dedicated to providing medicines and clean water to impoverished countries.
What is Sierra Oil and how did it get started? What is the ultimate goal of Sierra?
Sierra is a Private Equity backed (Encap, Riverstone, and Blackrock) Oil and Gas company founded in 2014 to focus on the inevitable Mexico Energy Reform. The company founders include a mix of International global Energy experts, technical and commercial expertise from Mexico, as well as strong legal, compliance and government relations.
I am a founding partner. Our CEO is Ivan Sandrea (Venezuelan) who had worked in Mexico on other pre reform initiatives. The company has both an Upstream and Midstream mission. Our ultimate goal is to create a world class Mexican independent oil and gas producing company as well as participate in selective high return oil and gas transport and storage opportunities. Private Equity in general was looking for a way to capture some of this new and exciting Mexico Opportunity and we were the first one to do so.
What is the outlook for Mexico in terms of exploration and development of oil and gas, and new reserves?
Mexico is considered by many to be an emerging Super Basin due to its highly prolific petroleum systems specifically a series of world class source rocks. Several key proven Basins exist in Mexico. Sureste Basin has been our focus due to an early mover position established in the reform. We identified Sureste Basin as having the highest value due primarily to :
- A high propensity of undrilled large GOM like structural prospects ie underexplored.
- Low cost overall of exploration and development due primarily to recent market conditions and high potential resources within relatively shallow water environments
- Light oil trend
- Large contiguous blocks offered by CNH in a fast timeline
- Low cost of entry in terms of access and 3D data
- Relative closeness to Houston and services
- Low Country Risk relative to other big International resource arenas
In addition to Brasil and Guyana, Mexico is now clearly a recognized hot spot for majors and Independents alike in terms of planned investment and growing level of exploration and appraisal activity.
What do you think are some of the opportunities that exist right now in the Mexican waters of the Gulf of Mexico?
Exploration, Discovered but not appraised fields, and Field Developments (Mature Fields) will be the focus for the next few years. Upwards of 40 wells are now committed in recent bid rounds. Most of this activity will be in the Sureste and Perdido areas. It will be an exciting time in the next 3-4 years and many major discoveries will be made.
A strong unconventional gas, condensate and oil play can be made in a few of the proven onshore basins provided continued reforms, infrastructure development, improvements and incentives to related Energy investments, related laws and low cost services can be obtained.
Have there been any positive results in recent years? What are they?
Sierra and its partners Premier and Talos made one of the top 10 oil discoveries globally in the last 10 years with the offshore Sureste Basin Zama 1 well in July 2017. Early OOIP estimates range up to 1.7BNBLS. This is a lite oil discovery with a lowcost development providing high returns. Sierra acreage position is based on this same type of play in our other blocks. We see similar geophysical attributes found in Zama in our other blocks including AVO, flat spot, and amplitude conformance.
Other world class players Repsol, Petronas and Murphy who Sierra is partnered with as well as ENI, DEA Shell Total and others will also be drilling similar high potential prospects in adjacent acreage to the dominant Sierra position. BHP, Pan American, ENI, and Petrobal/Fieldwood are well underway with their appraisal programs of Pemex discoveries and will be producing from their discovered fields that they obtained in the recent awards.
What makes exploration in the Mexican waters of the Gulf of Mexico so exciting? Are there any particular challenges?
Exciting: It’s the combination of its huge untapped low risk potential held in large structures. Some very exciting and diverse play types and multiple potential reservoir sections. You have to remember that all foreign investment was shut down in 1938. So its like looking at the GOM offshore 20-30 years ago. Pemex was a great oil finder in the carbonate play but had not fully exploited this main clastic GOM style play.
Challenges: The reform has moved quickly. We want to be the smartest company at the table when it comes to geotechnical excellence and economic and commercial decision making. We want to have the best data set possible to do this. We have amassed a large position in a short time and maturing all the work necessary to mature our deep portfolio to a drilling stage is one of our main efforts at this point.
Managing low costs in exploration drilling and development costs are of course always important. Safety, environmental process, etc. are at the forefront right now as the activity levels increase. Moving forward and understanding a maturing regulatory system. Maturing everything from unitization process to how to best development infrastructure and move crude once you do produce. Being the first mover in Mexico, Sierra have been at the forefront of many of these types of discussions including for example getting permits and work programs approved etc. The good news is the CNH is a transparent, hard working enterprise who is always making improvements and working to make this reform successful.
Do you have plans to explore onshore?
We have already evaluated many areas onshore exploration across a few of the key basins as they came up in the bid rounds. We have not found an asset yet that meets our high standards for materiality, value generation and has safe and secure and environmental and social attractive metrics we would need. We have reviewed several onshore fields as well and will continue to evaluate these. The market, actually, onshore Mexico has had a lot of interest to date with some surprising bids. Its more expensive in some respects to get into the onshore then the higher value offshore.
If you would like, we would love it if you could recommend a few books you found very useful and interesting.
From a personal side I can recommend:
- Getty-As I See It, Autobiography,
- Leonardo Da Vinci by Walter Isaacson.