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Mexican oil output data beckons private operators

Bnamericas Published: Tuesday, February 25, 2020
Mexican oil output data beckons private operators

Last month Mexico reached 1.724Mb/d (millions of barrels per day) of oil output, 6% higher than a year ago and giving heart to the possibility of 2020 seeing production rebound after 15 years of declines. 

Mexico’s shallow water wells, generally less mature than its onshore oil areas, continued to be the source of greatest production. Shallow water output accounted for 1.412Mb/d of oil, while onshore wells produced nearly 312,000b/d. 

The lion’s share of oil, 1.67Mb/d (97%), came from state oil company Pemex, while private operators produced nearly 49,000b/d (3%). Pemex’s output rose 0.7% from December to January and the company’s production was 5.5% higher than in January 2019. 

Even so, the January data suggests more efficient growth on the part of Mexico’s private operators, despite the end of private oil auctions and recent restrictions designed to tip output in Pemex’s favor.

Output from private operators drove total production 2.3% higher in January compared to December, capping a 53% rise for the small private sector since January 2019. 

SOUTHEASTERN BASINS

Mexico’s richest oil patch, the Cuencas del Sureste or southeastern basins, which stretch across Veracruz, Tabasco and Campeche states, accounted for 1.408Mb/d of offshore and 228,300b/d onshore production. 

Source: BNamericas project database

The BNamericas project database tracks 25 blocks in the southeastern basins

Output for the overwhelmingly onshore Tampico-Misantla field declined 1,600b/d to around 72,500b/d in January.  

The onshore Veracruz fields saw output return to 18,700b/d in January. While that marks a recovery from November’s lull of 17,800b/d, it is in line with production over the last six months, which has averaged 18,667b/d.  

Meanwhile, several of Mexico’s oil patches produce only modest amounts of gas, including the Burgos field, the Chiapas Fold Belt and Sabinas

DATA BUTTRESSES PRIVATE INVOLVEMENT

On the surface, the January output data reinforces the narrative offered by President Andres Manuel López Obrador (AMLO) that Mexico is on the cusp of reviving its bedraggled oil industry, with Pemex leading the charge to lift production toward 1.95Mb/d by year-end. 

AMLO has called for the longer term goal of surpassing 2.6Mb/d by the end of his term in 2024. 

However, while January’s output marks a clear increase over December data, despite massive government injections of cash Pemex struggled to sustain even modest output increases in 2019. Output rose four months in a row before falling late last year. National production averaged 1.678M/d in 2019, as opposed to 1.809Mb/d in 2018.   

Below the surface, the January data suggests ongoing challenges for Pemex. 

The company is way behind in bringing its 20 “priority” fields online, it appears technologically incapable of harvesting the nation’s untapped oil deposits in deeper waters and it faces enormous medium-term challenges given its low levels of replacement rates and debts of nearly US$100bn

In an apparent nod toward private operators, AMLO has recently softened his tone by praising Italian oil company Eni for its willingness to invest large sums that led the company to announce a major offshore find earlier this month. 

In mid-February, Eni announced that its Saasken exploratory well in Block 10 indicated 200-300Mb of high-quality oil.

Based on Eni’s forecasts, a single operational well at the Saasken site could raise daily oil production by private operators by nearly 20%. 

It would also mark the second major oil discovery since Mexico’s energy reform was announced six years ago, the first being US-based Talos Energy’s discovery of the Zama field in 2017.  

Calling Eni’s finding “very good news,” during a press conference last week AMLO praised Eni for already being “in the process of expansion, and they have made this new discovery, which is going to mean a significant increase in oil production,”

As of late February, Eni and Mexico’s Capricorn have drilled exploratory wells offshore in Mexico, while Royal Dutch Shell is currently drilling Chibu-1 exploratory well in ultra-deep waters. Pemex has also begun work on a well in its 26m-deep Uchukil field.  

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