(S&P Global Platts, Daniel Rodriguez, 27.Sep.2018) — Mexico’s state oil company Pemex expects to make a final investment decision (FID) and begin development of its Ixachi, Pokche, Xikin, and Suuk discoveries in 2019, CEO Carlos Trevino told S&P Global Platts.
These fields are at the top of Pemex’s project pipeline, but their FID will depend on other stakeholders such as Mexico’s Treasury Secretariat, Trevino said on the sideline of the Mexican Petroleum Congress in Acapulco late Wednesday.
“We expect the incoming president will give a great value to these fields in his mission to raise Mexico’s oil production,” Trevino said.
Based on the information available, Platts Analytics estimates the peak production of these four fields could produce a combined 135,000 b/d.
Xikin has 190 MMbbl 2P reserves, Suuk has 50 MMbl 2P and 205 MMbbl 3P, Pokche has 36 MMbbl 2P and 186 MMbbl 3P, and Ixachi with 67 MMbbl 2P and 120 MMbbl 3P.
President-elect Andres Manuel Lopez Obrador has pledged to raise Mexico’s crude oil production to 2.6 million b/d by the end of his term in 2024, up from 1.8 million b/d in August.
Trevino said Pemex is not going to be able to achieve its goal of having a yearly production average of 1.95 million b/d for 2018.
The company will not be able to achieve its goal because of water invading its Xanab shallow water field in Tabasco’s coastline.
Xanab’s production has been in a freefall since January, decreasing its output by 68,200 b/d to 104,400 b/d in August. Pemex produced 1.81 million b/d in August, down from 1.93 million b/d in January.
THE CHALLENGE: A FINANCIALLY INDEPENDENT PEMEX
The great challenge Pemex faces is to decouple itself from the country’s federal government budget in its mission to become a competitive state-owned company, Trevino said.
“It is hard to know what Pemex’s budget will be as long as it will depend on the state of public finances,” Trevino added.
Since oil prices crashed in 2014, Pemex’s upstream capital investment budget was cut by two thirds to $7.2 billion in 2018, making it difficult for the company to develop its production portfolio.
If prices stay at $80/b, Trevino said Pemex’s upstream capital investment budget should return to levels similar to 2014 or 2015, somewhere between $12.7 and $17 billion.
However, the final budget the company will have will depend on the incoming administration, led by President-elect Andres Manuel Lopez Obrador.
According to Mexico’s National Hydrocarbon Commission, Pemex requires an investment of at least $20 billion to be able to develop the acreage it won at hydrocarbon auction round zero.
According to CNH, this will allow Pemex to increase its crude oil production to 1.96 million b/d by 2022 from a bottom of 1.7 million b/d in 2020.
Trevino said that he expects Pemex to reach an inflection point somewhere before 2020, adding that CNH’s projection is the worst case scenario while the state company’s forecast of producing 2 million b/d by 2020 is the best case scenario.
The critical difference between Pemex and CNH’s projections are the permitting times. “We input the shortest approval times possible while they take the maximum allowed times for granting permits,” he added.
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