Alfredo Guzmán: Making a Case for Mexico's Oil & Gas Future
About 100 years ago, Mexico practically dominated the industry as the world’s second largest oil producer, trailing only the United States, and as the world leader in oil exports. Its well-known Northern Golden Lane fields in the Tampico-Misantla Basin were pumping up to 300,000 barrels of oil a day. That era created a strong sense of pride for the country and has motivated some of Mexico’s modern-day geologists to push for a renaissance. Believing that Mexico has much more potential than recognized, Alfredo Guzmán, a former Vice President of Exploration at Pemex and charter Commissioner of Mexico’s National Hydrocarbons Commission, is encouraging a renewal of exploration. Having worked in all eleven hydrocarbon-bearing basins of Mexico and been responsible for great surges in production, Guzmán knows the country is steeped in unrecovered resources that could bolster the struggling Mexican economy.
“Mexico is poorly explored and exploited because since 1938 the government has maintained a monopoly on the search and production of hydrocarbons. It is impossible to benefit from its huge endowment with only one oil company,” Guzmán said. “Even if Mexico had an ecosystem of thousands of operating and service companies, that would still only make a dent in all that richness.”
Guzmán, 72, also knows that the window for capitalizing on hydrocarbons is shrinking, as the world searches for reliable sources of sustainable energy. As a result, he has been championing efforts for Mexico to lift its current ban on hydraulic fracturing and unsuspend auctions for private investors and international operators. The time for Mexico is now.
Alfredo Guzmán: A Budding Geologist
Although his father, the late Eduardo J. Guzmán, worked as a geologist for Pemex for 34 years, the young Alfredo initially opted to study chemistry at Texas Tech University, until a geology professor took him to Palo Duro Canyon State Park near Amarillo, Texas. Guzmán became mesmerized with the stories that rocks could tell about the earth and found himself following in his father’s footsteps.
After earning bachelor’s and master’s degrees in geology, concentrating on carbonates, he declined offers to work at independent oil companies, enticed by the great potential of Mexico. As a young geologist with big dreams, Guzmán was especially attracted to the large carbonate fields discovered in the Tampico-Misantla Basin of North Central Mexico. He began his career at Pemex in 1974 as a field geologist. Just four years later those same carbonate fields gave rise to the Sureste Basin’s Cantarell field, which became the world’s largest offshore oil field in 2004, when it reached its peak production of 2.2 MMbopd.
Guzmán participated in the discovery of substantial gas fields in the Vizcaíno Desert and in the Gulf of Cortés, but they could not compete with the oil-rich Sureste Basin and were not developed. “I was not frustrated about these discoveries not being economical to develop,” Guzmán notes. “I was young and having fun.”
In the early 1980s, he worked in the Chihuahua Basin in search of potential similar to the Permian Basin across the border in the US, but the difference between the geological conditions across the Rio Grande ended any hope of finding sweet spots there. He then focused on the Sierra Madre Oriental foldand-thrust belt west of the Tampico-Misantla Basin, known for its oil potential, but a lack of high-resolution seismic data and the national pursuit of less complex basins prevented its exploration.
Over the next decade, Guzmán continued to explore the Tampico-Misantla, where substantial oil accumulations had been found in carbonates, and the Chicontepec Subbasin, known for its tight oil. However, “exploration became a challenge, as most human resources, rigs and investments were transferred to the recently discovered fields in the Sureste Basin,” Guzmán explains. “Pemex, being the only oil company in Mexico, abandoned for all practical purposes the exploration and development of the Tampico-Misantla Basin.” The move made sense for a company, but not for a country.
A Wave of Success in Mexican Oil & Gas Exploration
In the early 1990s Guzmán was asked to move to northern Mexico to lead the rejuvenation of non-associated gas production in the Burgos and Sabinas Basins, which were experiencing significant declines. Having read about the success of multidisciplinary approaches in South Texas, he put together five such teams for the job and, harnessing the talent of this broad range of experts, Guzmán and the teams evaluated undeveloped discoveries and proposed leads, prospects and drilling locations based on 3D seismic data. Applying advanced technology, such as PDC bits, well completions with larger fractures, and the commingling of multiple sands, daily gas production increased from 180 MMcfg to more than 1.6 Bcfg.
In 1995, Guzmán became Exploration Manager of Pemex’s North Region and oversaw the exploration of northern Mexico, including the deep waters in the Gulf of Mexico. Four years later, he became Vice President of Exploration and, with the help of Brett Edwards, an Australian international consultant, he implemented a process for the evaluation of exploration opportunities. Under Guzmán’s guidance, the country’s registry grew from roughly 50 drillable locations to more than 2,100 leads, prospects and identified drilling locations.
Guzmán was made Vice President of the North Region in 2001 by Pemex E&P CEO Luis Ramírez Corzo, becoming the first geologist in Mexico to hold such a position. His expertise was needed once more, as that region was responsible for all of the country’s dry gas resources. He oversaw operations in the Veracruz Basin and applied 3D seismic technology across all producing areas, resulting in more than a dozen new discoveries. After researching the prolific gas wells in Trinidad and Tobago, he began implementing horizontal drilling completions with slotted casing, and within three years daily production jumped from 130 MMcfg to nearly 1 Bcfg.
“Alfredo has carefully studied the resource development in the US and other places in the world and realized how these lessons could be applied to Mexico’s extraordinary opportunities,” said Paul Weimer, professor at the University of Colorado in Boulder and Director of the Energy and Minerals Applied Research Center, who worked with Guzmán on a research project between Pemex and the university. “He is a fantastic geologist and a global ambassador of our profession and industry.”
The Case for New Technology for Oil and Gas Exploration in Mexico
DeGolyer and MacNaughton had certified in the 1960s that the Chicontepec Sub-basin contained 137 Bb oil and 60 Tcfg – yet the area of about 5,000 km2 was producing only 3,000 bopd. “Although our marching orders were to explore for gas, this was too challenging to let it rest,” Guzmán said. “This basin has reservoirs strikingly similar to the Spraberry Formation of the Permian Basin.
With a sliver of a budget, Guzmán and his team began testing reservoirs in 2002, raising output to 30,000 bopd and making the case for drilling 16,000 new wells. Yet additional investments were desperately needed, as Mexico’s powerhouse, the Cantarell field, began declining in 2005, and Pemex had not really funded exploration since the mid-1980s. In 2006, it authorized the development of the Chicontepec and the Ku-Maloob-Zaap fields, but hit a snag when oil prices tumbled in 2013, rendering the Chicontepec project uneconomical.
When Mexico historically opened its borders to outside operators that same year, an air of hope penetrated the industry and the country, and Mexico waited for the price of oil to slowly rise. Developing new discoveries could be the gateway to renewed prosperity. Yet, as oil labored through a long comeback and reached levels high enough to make shale plays economical, Mexico became less welcoming to third parties and in 2018 announced a moratorium on hydraulic fracturing – dashing hopes for a new era.
“These are regretful decisions,” Guzmán says. “Hydraulic fracturing is capital intensive. Due to Pemex’s limited resources, independent parties could help the industry thrive.”
More than 90% of the substantial resources in the Tampico-Misantla Basin are in tight rocks, which require horizontal wells with hydraulic fracturing for recovery. “The basin has the same amount of oil and similar reservoirs as the Permian Basin, which produces 4.8 MMbopd, a third of the US production,” he adds.
Guzmán shared Mexico’s plight at the American Association of Petroleum Geologists (AAPG) Global Super Basins seminar in 2019. AAPG Past President Charles Sternbach recalled that “Alfredo gave a brilliant assessment of Mexico’s undercapitalization. He has been tireless in his work to help Mexico achieve its potential.”
Guzmán has been lobbying for Mexico to encourage third parties to help bridge the technology gap and also adopt best practices in horizontal drilling and hydraulic fracturing, working to counter local environmentalists’ radical rhetoric about risk, pollution and seismicity.
Waiting for Change
After 32 years with Pemex, Guzmán retired in 2007, affording him more time to dedicate to the AAPG, having served as President of the Latin American and the Caribbean Region, as Regions Vice President, a two-time candidate for AAPG President and recipient of the Michel T. Halbouty Outstanding Leadership Award. He also served as President of the Mexican Association of Petroleum Geologists.
Just two years after retiring, Guzmán was asked to become a charter Commissioner for Mexico’s National Hydrocarbons Commission (CNH). He strived to make known how Mexico’s hydrocarbon endowment could benefit its people if resources could be monetized. And, he has been promoting the development of tight oil resources in the Tampico-Misantla Basin that could easily make up for the steady declines of the country’s legacy fields.
However, his tenure at the CNH was short because of a health condition of his wife, Kitty. During his career, Guzmán had moved his wife and three daughters 18 times and to nine different states, and it was time to settle down.
Yet he continues to advocate for Mexico’s oil and gas industry and its people.
“The age of oil will be over in 20 or 30 years. Countries such as Brazil, Guyana and Argentina that are ramping up their Playuela gas well blow-out, Veracruz Basin, 2004. Alfredo Guzmán production will make a killing once the price of oil recovers,” Guzmán says. “Mexico could easily produce an additional couple of million barrels a day in northern Veracruz if private companies and hydraulic fracturing were allowed. The income could solve in the short run all of the country’s need for oil and benefit a lot of people in Mexico.”
Further Reading on Oil and Gas in Mexico
Extraordinary Hydrocarbon Play Systems Identified Offshore Mexico
Karyna Rodriguez and Neil Hodgson, Geoscience Team; Searcher
Improvements in seismic processing are revealing huge offshore oil and gas potential in the southern Gulf of Mexico.
This article appeared in Vol. 17, No. 2 - 2020
Mexico’s Energy Reform
Aruna Mannie, Premier Oil
Five years on, what has Mexico’s energy reform delivered for the country’s oil and gas exploration and production ambitions?
This article appeared in Vol. 17, No. 2 - 2020
World Class Exploration Opportunities in Deepwater Mexico
Peter Abrahamson and Kenneth Mohn, MultiClient Geophysical ASA (MCG)
A closer look at the structure and petroleum potential of the Campeche Basin offshore Mexico.
This article appeared in Vol. 13, No. 4 - 2016