Analysts skeptical about Pemex's 2009 production forecast of 2.65Mb/d

Wednesday, August 12, 2009

Mexico's state oil company Pemex recently revised its 2009 production forecast down to 2.65Mb/d from 2.75Mb/d, but the company's forecasts are usually taken with a grain of salt given its repeated inability to meet its own predicted production levels. Analysts believe the drop could be even more severe.

National production averaged 2.59Mb/d in the second quarter of the year and 2.67Mb/d in the first quarter.

Output continues to slide on the natural decline of the prolific Cantarell field, which at its peak accounted for more than half the country's total production.

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Even before Pemex revised its outlook to 2.65Mb/d for 2009, consultancy IPD Latin America was expecting the company to be producing less than 2.5Mb/d going into next year, managing director John Padilla told BNamericas.

George Baker, director of Houston-based consultancy Baker & Associates, said Pemex would be following statistical trends if it finished the year with production of 2.5Mb/d.

"I don't see how they're going to come up with 2.65Mb/d. But to some extent we should give Pemex the benefit of the doubt. There may be fields that they know are going to come into production in the back half of the year that are substantially going to raise production," Baker said.

"The stars don't look promising, but that doesn't mean they couldn't do it," he added.

Mexican energy expert David Shields said that Cantarell is already at low levels, hitting 637,418b/d in 2Q09, down 38.9% year-on-year.

"I would imagine [national] output will continue to decline slightly over the second half of the year and also next year. In recent times it's been declining at 7-8% annually, and I would expect that rate to begin to slow. But I do foresee that next year they will probably be producing below 2.5Mb/d. They may fall to 2.4Mb/d," Shields said.

Cantarell production could fall to between 400,000-450,000b/d by the end of 2010," Shields continued, noting that the rest of Mexico's production should remain fairly stable.

Baker also foresees a fall of some 200,000b/d in 2010.

"They say it's going to be less than that, but that's what it has averaged the past several years, and the average is the next best thing to knowing nothing," Baker said.

Despite some favorable results in crude production at the neighboring Ku-Maloob-Zaap project and natural gas production, Gianna Bern, president of Chicago-based energy research and consulting firm Brookshire Advisory & Research, told BNamericas that the trend was ominous.

"Unless they can bring some very significant projects online real quickly, in the next two or three quarters, it's going to be very challenging to replace the Cantarell production," Bern said.

Pemex has poured billions of dollars into developing the Chicontepec field in Puebla and Veracruz states on the hope it can offset Cantarell's fall, but the field has yet to measure up to all the hype. According to the Pemex's current plans, it could be producing 737,000b/d by 2017.

Chicontepec saw a 7,000b/d jump in production to 37,106b/d in early July, but the average output for 2008 was only 33,000b/d. The fact that the field has failed to produce the desired results to date has raised questions about the rationale behind the project.

Mexico, one of the top 10 oil producers in the world, is currently the third largest exporter to the US. Pemex and the source of some 40% of government revenue.