Pokché

Project Overview

• The Pokché project is one of the oil fields where Pemex has been engaging in early production, utilizing a legal provision known as the "transition period" under Mexican law. This provision allows for early production after a discovery without a thorough development plan.

Authorization and Timeline

• On October 15, 2024, the National Hydrocarbons Commission (CNH) authorized Pemex to move into a development plan at the Pokché project. However, Pemex had already been in early production at this site for four years prior to this authorization.

Costs and Expenditure

• Pemex has spent approximately $500 million at the Pokché project, which is more than twice the original estimated cost. This significant overspend indicates inefficiencies in the project's management.

Development and Evaluation Issues

• Critics argue that Pemex's rush to production has led to a lack of thorough evaluation processes. This has resulted in both overestimation and underestimation of the field's resources, which can be harmful to optimal development. The project exemplifies how skipping essential evaluation steps can lead to suboptimal resource exploitation.

Long-Term Implications

• Experts, including Pedro Martinez from S&P Global Commodity Insights, have noted that the hurried development approach at Pokché and similar fields is leading to early decline and lower long-term recovery rates. This suggests that the project may not be maximizing the value of the resources as intended.

Regulatory and Policy Context

• The use of the transition period for early production was originally intended for gas fields where closing wells after discovery was impractical. However, Pemex has extended this practice to crude oil fields as well, which has become a regular rather than exceptional practice. This deviation from the original intent has raised concerns about regulatory capture and the prioritization of immediate production over long-term value maximization.

Expert Criticism

• Experts like Gonzalo Monroy, CEO of consultancy GMEC, and others familiar with the CNH, have criticized Pemex's approach, stating that it results in leaving significant value "on the table" due to inefficient development and lack of proper resource assessment. This criticism highlights the potential long-term financial and resource management implications of Pemex's strategies.