Kan discovery in Mexico’s shallow water one of the largest since 2020

Addressing Wintershall Dea’s Kan-1 discovery, Adrian Lara, Principal Research Analyst Latin America Upstream Oil and Gas, said “With Wintershall Dea’s first operated exploration well drilled in Mexico, the announced expected resource of 200 to 300 million barrels of equivalent of oil and gas in place outperforms the original prospective resource estimated at 196 mmboe. The discovery is one of the largest in Mexico’s shallow-water since Zama, made by Talos in 2017 and Saasken made by Eni in 2020.”

The prospect is located approximately 25 km off the Tabasco coast in water depths of about 50 metres. The Kan-1EXP well reached a total depth of 3,314 metres, finding more than 170 metres net pay sands of high-quality oil in the Upper Miocene. The discovery is in Block R03-L01 AS-CS-14, where Wintershall Dea holds 40% and forms a consortium with Harbour Energy and Sapura OMV, each holding 30% of the block.

“Exploration blocks taken in the 2014-2018 licensing rounds were mainly taken by international oil companies (IOCs) and have a focus on unexplored areas with greenfield opportunities,” said Lara.  “IOCs have been more successful in recent years in both discovered and commercial volumes in shallow-water exploration than the national oil company Pemex, which has focused on established areas.”

For the asset, Wood Mackenzie assumes a typical 30% recovery factor (RF) and a higher RF scenario at 40%, in which Kan would hold between 75-100 mmboe recoverable resources, respectively. Considering a similar gas-oil ratio (GOR) to nearby developments, Kan may contain between 22-30 billion cubic feet of gas. Wood Mackenzie’s initial analysis shows that Kan requires between US$54.7/bbl and US$68.5/bbl Brent price to break even (NPV10, 2023) under the above-mentioned scenarios.

“Currently, Wintershall is working in a second exploration well Ix-1 in the same block, also targeting an Upper Miocene reservoir with similar expected prospective resources,” said Diego Alviso, senior research analyst, Wood Mackenzie. “Another discovery in the block would greatly aid the justification of a possible cluster development.”

Wintershall Dea stated future production from this discovery could be part of a new hub in the area, optimizing infrastructure from nearby fields.   

Added Alviso, “Doubling down its presence in Mexico is delivering positive results for Wintershall Dea. The operator recently exited other Latin American countries, but increased participation in Mexico projects such as Hokchi. With a possible increase of future developments with Kan in its portfolio, Wintershall is well positioned to be within the top four operators in the country.”