MEXICO CITY (Reuters) - Canada’s Renaissance Oil Corp (ROE.V) is negotiating with Mexican national oil company Pemex over future joint ventures as it gains a foothold in the country’s liberalized energy market, Chief Executive Craig Steinke said in an interview.
Renaissance was co-founded in 2014 by Ian Telfer, chairman of Goldcorp Inc., the biggest gold miner in Mexico. The new firm won three of 25 blocks in a first onshore auction late last year, and would like to operate additional properties in Mexico.
In an interview in Mexico City, Steinke said Renaissance is in talks with Pemex over potential onshore joint ventures, though he declined to offer details.
“Pemex has a huge cache of properties. They clearly don’t have the capital to develop them and we believe that’s a big, big source of opportunity for us,” he said.
Renaissance is also seeking to take over “a few” Pemex service contracts to be migrated into exploration and production projects under a historic energy overhaul finalized in 2014 that ended Pemex’s decades-long monopoly, he added.
Mexico has announced plans to migrate 22 service contracts.
Renaissance is also bullish on Mexico’s untapped shale resources, although Pemex has largely avoided these developments despite booming production in Texas.
Some shale projects in the United States are profitable at about $35 per barrel, a figure Steinke sees dropping further in the next few years. The crude market slump provides firms like Renaissance with a relative advantage since it is new and not exposed to the sudden drop in prices like many peers, he added.
Signed earlier this week, the contracts covering the three blocks in the southern state of Chiapas were initially drilled by Pemex in the 1970s but mostly neglected since then.
Renaissance expects to complete four wells at its Chiapas blocks next year, requiring investment of up to $20 million, with crude output reaching at least 3,000 barrels per day (bpd), up from about 700 bpd currently, Steinke said.
Renaissance could drill more wells, but the higher royalty the government requires companies to propose to win developments rights will likely preclude that, Steinke said, arguing that a lower one would encourage additional production.
“There’s too much emphasis on the incremental royalty and not enough emphasis on the work program,” he added. “It’s just going to force the successful contractor to leave a lot of the hydrocarbon resource in the ground.”
Editing by Dave Graham and James Dalgleish