Pemex hopes auctions, farm-outs can revert production decline

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Tuesday, February 28, 2017

Pemex's crude oil and natural gas production continue to decline, but two auctions for shallow water and onshore fields, scheduled for June and July, respectively, and a series of farm-outs, are intended to reverse that trend.

Crude oil production dipped to 2.16Mb/d in 2016 compared with 2.26Mb/d in 2015 after four straight quarterly declines, according to the company's preliminary full-year financial results, despite its boast that it exceeded its annual production target of 2.13Mb/d for the first time in five years.

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Natural gas production dropped to 4.86Bf3/d during the year from 5.5Bf3/d in 2015.

However, Pemex is confident it will reverse the decline as a result of the auctions and farm-outs scheduled to take place this year, buoyed by the additional production enabled by the four auctions held so far, one for onshore, two for shallow water and one for deepwater fields.

The deepwater auction also included awarding a contract to BHP Billiton to partner with Pemex on the development of the Trión block. Pemex said it hopes to begin exploration at the block this year and is targeting 2023 for the start of production.

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As the majority stakeholder, with 60%, BHP Billiton will invest US$1.9bn in development of the Trión block before Pemex makes additional contributions, and the contract between both parties is scheduled to be signed in the first week of March. Pemex expects to invest US$600mn in the block.

Pemex will also sign a contract with Chevron and Inpex in March for the joint development of block 3 in the Perdido belt, which has prospective resources of 3.43Bboe.

In the onshore auction in July, Pemex will seek to farm out production at the Ogarrio and Cárdenas-Mora blocks, which have 3P reserves of 54Mboe and 94.3Mboe, respectively.

As a result of exploration advances on five offshore wells during 2016, Pemex will add 32,863b/d to its crude output, and 64.7Mf3/d of natural gas production, the company said. The wells range between 25m and 3,000m in depth.