Mexico Must Boost Oil Exploration to Halt Output Fall -Pemex

By Marianna Parraga and David Alire Garcia
Monday, October 1, 2018

Mexico will need to double to about $4 billion its annual oil exploration investment to reverse a 14-year decline in output, a move that will require more funding by Pemex and private producers, a top official with the state-run firm said Friday.

The nation's oil industry needs Petroleos Mexicanos to invest more than $2.5 billion per year and another $1 billion to $1.5 billion from private companies to fully replace its reserves, Jose Antonio Escalera, the firm's chief of exploration, said at an energy conference in Acapulco.

Pemex this year expects to invest about $1.65 billion, roughly the same as 2017. Reserves fell 7 percent this year, to 8.48 billion barrels of oil equivalent, and have slid more than 40 percent over the past decade, according to government data.

Escalera made the comments as the administration of President-elect Andres Manuel Lopez Obrador is still formulating its plan for Pemex and has given mixed signals over the future of the landmark energy reform.

Lopez Obrador, who will take office in December, has said he aims to boost Mexico's oil production by a third to 2.5 million barrels per day (bpd,) from 1.82 million bpd in August. He also wants to increase domestic refining to end imports of foreign fuel.

However, he has been a critic of the nation's opening of its oil industry to outside firms and has called for a review of the more than 100 exploration and production contracts awarded to oil companies, and a suspension of future auctions, casting doubts on what direction the energy reform will take in coming years.

"The reason why Mexico has seen an output decline since 2004 is not because of lack of potential, it is because it stopped exploring," Juan Carlos Zepeda, chief of Mexico's energy regulator National Hydrocarbons Commission (CNH), said at the energy conference.

Pemex said it will not meet its annual output target in 2018, and is likely to see a further slide in 2019.

Long Range Investment
Pemex is making progress: It drilled 24 exploratory wells in 2017 and 35 are planned for 2018. But stemming the oil output decline will require the country to replace its reserves faster, Pemex and experts interviewed at the conference said.

The country will need $20 billion in exploration investment in the long term to confirm its estimated reserves and increase oil and gas output, according to Pemex's calculations, a difficult task as prospective oil and gas resources to be confirmed are mostly in deep waters and onshore shale formations that require higher investment and technical knowledge.

As a sign of how it has fallen behind in replacing those reserves, Mexico has drilled 58 exploration wells on its side of the deep water Gulf of Mexico, compared with more than 1,100 on the U.S. side.

"What we need is more activity, even more exploration," said Monica Boe, Mexico country manager of Norwegian oil major Equinor. She said auction terms could be changed to encourage more exploration activity.


(Reporting by Marianna Parraga and David Alire Garcia; editing by Gary McWilliams)

Categories: Finance Offshore North America Government Update Oil Offshore Energy Activity Geoscience

Related Stories

MODEC Ramps Up Hammerhead FPSO Work After ExxonMobil's Go-Ahead

Seatrium Secures ABS Backing for Deepwater FPSO Design

MDL Secures Cable Laying Job in Asia Pacific

Hanwha Ocean Enlists ABB for Singapore’s First Floating LNG Terminal

POSH Set to Tow Nguya FLNG from China to Eni’s Congo Field

Allseas-Boskalis Consortium Bags $1.4B Offshore Gas Pipeline Job in Taiwan

Seatrium Makes First Turnkey FPSO Delivery to Petrobras

Four Jack-Up Drilling Rig Deals Set to Bring In $129M for Borr Drilling

Centrica and Thailand’s PTT Ink Long-Term LNG Supply Deal

ABL Lands Work on BP’s Indonesian Gas and CCUS Project

Current News

MODEC Ramps Up Hammerhead FPSO Work After ExxonMobil's Go-Ahead

Aesen, DOC JV Targets Subsea Cable Logistics

Timor Gap Boosts Stake in Finder Energy’s Timor-Leste Oil Fields

SBM Offshore Starts Construction of FSO for Trion Oil Field off Mexico

Russia Targets 2028 for Sakhalin-3 Gas Project Start Up

Seatrium Secures ABS Backing for Deepwater FPSO Design

MDL Secures Cable Laying Job in Asia Pacific

Hibiscus Petroleum Starts Drilling at Teal West Field off UK

Yinson Production Nets DNV Approval for New FPSO Hull Design

Hanwha Ocean's Tidal Action Drillship Starts Maiden Job with Petrobras

Subscribe for AOG Digital E‑News

AOG Digital E-News is the subsea industry's largest circulation and most authoritative ENews Service, delivered to your Email three times per week

https://accounts.newwavemedia.com