(Argus, 6.Apr.2020) — Mexico will participate in an Opec+ meeting on 9 April, the energy ministry told Argus today.
“As a member of Opec+, Mexico will participate in the next meeting,” the ministry said.
Mexico does not yet anticipate any cuts to production as part of a wider agreement, the ministry added. “For the time being we do not envisage [production or capital expenditure cuts] but we continue to analyze the international environment and Opec decisions.”
Opec members and non-Opec members led by Russia are scheduled to participate in the call on 9 April — originally scheduled for today — to discuss possible new production restraints after Saudi Arabia and Russia’s failure to agree output cuts last month sent global crude prices into a tailspin.
Mexico’s state-owned Pemex produced 1.64mn b/d of crude in February, but expects to increase output to 1.85mn b/d this year, down from a pre-virus target of 1.95mn b/d.
Global crude oil prices crashed to their lowest in around 18 years over the past two weeks as Saudi Arabia and Russia failed to agree on production restraints. The situation — that threatens to flood the market with supply — is further compounded by a demand-side shock precipitated by measures to try to stop the coronavirus pandemic.
Pemex has a budget of $16.7bn this year. While other state-owned oil companies across Latin America — including Colombia’s Ecopetrol and Brazil’s Petrobras — have announced capital expenditure cuts as the crude price crash endangers breakeven levels, Pemex has not.
Mexico’s crude basket price that reflects a mix of its export grades dropped to a 21-year low of $10.37/bl on 30 March, well below Pemex’s 2019 breakeven level of $14.33/bl.
While the price started to inch up in anticipation of a deal at this week’s Opec meeting, at $20.48/bl it remains well below the $55/bl anticipated in Pemex’s business plan.
Mexico’s crude basket includes its export grade of Maya, as well as crude from the Cantarell and Ku-Maloob-Zaap fields.
Mexico’s private-sector oil association Amexhi declined to comment on the impact that any production cuts agreed at the Opec meeting may have on independent operators. It is unclear whether companies that hold production-sharing, farm-out or migrated contracts with Pemex would be exposed to production restraints.
Crude production under the Ogarrio and Cardenas Mora farm-outs hit 12,480 b/d in February, while production from the Santuario, Ebano, Mision and Miquetla contracts — migrated to production-sharing contracts with a private-sector operator between 2017 and 2018 — reached 20,000 b/d in February.
By Rebecca Conan
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