In 2003, the Mexican state oil company PEMEX's E&P unit PEMEX Exploration y Production (PEP) initiated a natural gas exploration program to increase Mexico's production of natural gas. The program consists of tendering "Multiple Services Contracts" (MSCs) and has been implemented in the Northeast of Mexico in the Burgos Basin. This area of Mexico has been identified by PEMEX geological studies to have the highest natural gas reserves in the country.
Under the contracts PEMEX maintains overall control of the exploration and production of the natural gas. The contractor receives a fee for the work performed and services rendered. Work under each contract includes a mixture of activities including maintenance and operation of existing production facilities, development projects, and exploration.
MSCs have been signed to in order to increase PEMEX gas production and obtain self-sufficiency for Mexico. As a result of those contracts, in 2006 the country produced more than 160 MMscfd of natural gas from the Burgos Basin.
Since 2003, PEMEX has signed seven MSCs. Amongst the winners of the tenders are several major international exploration and production companies such as Repsol and Petrobras, in addition to several partnerships including local companies and smaller E&P players. One such partnership formed the company Monclova Pirineos Gas S. de R.L de C.V (MPG) to operate the Pirineo MSC which it won in 2005.
In 2007, Avante Petroleum acquired a 9.2% share in MPG.
Field operations were initiated during April 2005. By the end of 2005 MPG was operating seven wells with a production average of ca 5 MMscfd, representing an increase of 2 MMscfd in relation to baseline production.
In 2006 two seismic surveys (amounting to ca 970 km2) were shot over the contract area, and several additional wells were drilled in order to appraise and develop the Pirineo gas field. Ongoing work includes the construction of production and treatment facilities for the processing of 50 MMscfd of gas from the Pirineo field and satellites.
Further exploration activities have been initiated during 2007 and 2008, with the acquisition of 900 km2 of additional 3D seismic.
During March 2007, MPG together with a partner secured a further MSC by winning the Nejo block through public tender. The minimum investment for the first three years is ca USD 110 million – with a maximum contract amount in excess of USD 912 million.
The Nejo block is located in the Burgos basin and covers an area of 5,680 km2. Existing proven and probable reserves are equivalent to about 79 Bcf. The planning of the forward work program for development and exploration is ongoing.