Issue link: http://resourceworld.uberflip.com/i/937377
88 www.resourceworld.com F E B R U A R Y / M A R C H 2 0 1 8 Oil Patch Report by Bruce Lantz M exico hasn't been usually linked to the list of major energy-producing countries but thanks to Renaissance Oil Corp. [ROE-TSXV; RNSFF-OTC] that could soon change. Led by legendary mining executive Ian Telfer, who took Goldcorp to its position as one of the world's leading gold mining companies, and co-founder Craig Steinke, Renaissance Oil is well on its way to becom- ing a major Mexican energy producer. The Vancouver, BC-based company is emerging from its startup phase, after going public in 2014 financed by a private placement of $5.75 million and acquiring mature or neglected fields given to the state-run Pemex, which was running into technology problems and a lack of capital investment, and auctioned in late 2015. "In hindsight, this was the best time to be selling an oil company, not starting one," said Renaissance Vice-President of Business Development Kevin Smith. "But with perseverance through a tough com- modity price cycle we have emerged with a strong foundation for going forward." That foundation started with a dual focus on mature fields and shale resource opportunities in Mexico and Renaissance being awarded, in 2016, the three largest producing properties in the first onshore auction under Mexico's new energy reform initiative: Mundo Nuevo, Topen and Malva, all three near Chiapas. "As a group, these properties were an ideal starting package for Renaissance to get into business in Mexico," said Smith. He said Mundo Nuevo reached peak production of more than 15,000 barrels per day (bbls/d) of light oil and more than 120 mmcf/d of natural gas in the early 1980s under Pemex while Topen hit 1,500 bbls/d of medium crude oil. Malva reached peak production of more than 2,000 bbls/d in the early 2000s. To satisfy minimum work agreements under the new structure, Renaissance is required to drill two wells at Malva, one at Topen and one at Mundo Nuevo in early 2018. It's worth the effort. Mexico may be sitting on more than 100 billion barrels of oil equivalent (boe) and the world's fourth-largest shale oil reserves measuring at least 60 billion boe, but Pemex has only explored 20% of the country and drilled just a few deepwater wells offshore. Now, Renaissance is the first and largest inde- pendent oil and gas producer in Mexico. "While the rest of North America, US and Canada, have been aggressive in exploiting their shale resources which con- tributes the bulk of new production gains, Mexico has not pursued unconventional resource development," Smith said. In fact, for almost eight decades Mexico's vast resources were seriously underdeveloped. But the breakup of the Pemex monopoly, despite millions of pro- testers taking to the streets in an attempt to thwart it, led to industry reforms and new exploration by companies with the req- uisite expertise and technology to return Mexico to its previous position as one of the world's top crude producers. Renaissance has capitalized on this, part- nering with Russian energy giant Lukoil [ LKOH-MCX] in the $45 million develop- ment of the massive Amatitlán shale play, an Upper Jurassic shale formation many consider to rival the Eagle Ford formation in South Texas which has produced up to 1.2 million barrels of oil daily. Amatitlán, which covers 60,000 acres, is estimated to hold more than 10 billion barrels of oil, 60% of that in the Upper Jurassic shale trend, with a resource concentration three times thicker than Eagle Ford, and closer in resource concentration per acre to the Permian Basin. It also resembles the Eagle Ford in terms of mineralogy, depth, pres- sure, TOC, carbonate content, etc. According to a statement on their web- site: "Renaissance, as of November, had completed the fifth workover, with a high stimulation recompletion of an up-hole Chicontepec interval; installed an artificial lift system to the fifth workover where oil production is improving to 75% of vol- ume; and drilling of Amatitlán 1649 is on schedule at 550 metres of 1,866 metres tar- geted total vertical depth. Average production from the compa- ny's 100%-owned and operated blocks in Chiapas, Mexico, for November 2017, was about 1,684 boe/d, comprising 39% oil and 61% natural gas. Average production in November 2017 is approximately 5% higher than October's estimated average production of 1,607 boe/d." "It's very early days but Renaissance has been studying the shale resource systems in Mexico for years," said Smith. "It has been formed with shale experts who have pioneered shale resource development, pri- marily key alumni of Mitchell Energy. "Our goal is to be pioneers in Mexico with the first commercial shale develop- ment program." That won't be without challenges. Smith said the greatest chal- lenge is operating in a new industry that often has changing regulations as Mexico itself learns to deal with the new industry it is creating. "Navigating these challenging and Renaissance Oil targeting Mexican oil prospects