Ready for the game: Schlumberger
Schlumberger aims for Mexican win
Schlumberger has emerged with the lowest bid on the first of two new 500-well drilling and completion contracts on Mexico’s Chicontepec heavy oil belt, dropping its price significantly below its own previous rates to fend off competition from Weatherford International.
The services giant bid nearly $690 million for the first 500-well package from state-run Pemex, coming in ahead of Weatherford’s $743 million, according to sources involved in the process.
Halliburton bid $854 million and Baker Hughes was in fourth place with an offer of $1.87 billlion, they said.
Bids on a second 500-well package are due to be opened on 26 February, and Pemex is expected to announce the winners next month after a period of technical analysis.
The objective of the two-pronged current tender is for Pemex to step up drilling in Puebla and Veracruz states.
The result surprised some onlookers as Schlumberger had questioned the viability of the prices bid by competitors in the previous two Chicontepec tenders, but ended up going even lower.
Schlumberger collected the first two big Chicontepec contracts, including a 2007 award for 500 wells, worth $1.4 billion.
However the services giant was undercut by about 40% when Weatherford burst onto the scene last year, grabbing two 300-well packages for a total $870 million.
Schlumberger chief executive Andrew Gould pondered publicly whether the job could be profitable at the new levels being offered, but told a second quarter 2008 conference call that successful execution would indeed drive prices lower.
Recent reports that Pemex was activating penalty clauses against Weatherford seemed to offer some vindication of the view that prices were too close to cost.
Sources close to the project said the problems were mainly due to a ramping up process as the Houston outfit brought 20 new rigs to the region in the second half of the year.
The fall in prices and drop in the North American rig count also seem to have taken their toll on bidders’ ambitions in Mexico, boosting competition.
The Chicontepec contains an estimated 18 billion barrels of recoverable oil but production conditions are difficult due to fragmented reservoirs and highly variable permeability.
Pemex intends to invest heavily in this region to compensate for the decline in production on big offshore fields, promising a total of up to 17,000 wells, starting at a current rate of about 1000 per year.
Pemex aims to build up production to at least 550,000 barrels per day by 2021, although efforts so far are yet to break the 40,000 bpd barrier.