(S&P Global Platts, Daniel Rodriguez, 4.Oct.2018) — Mexico’s President-elect Andres Manuel Lopez Obrador will allow Pemex to continue farming out projects to boost oil and natural gas production from mature and aging fields, according to a senior adviser to the incoming administration.
The incoming administration, in its oil production forecast for 2024, expects new secondary oil production will produce 380,000 b/d, or 15% of that year’s 2.48 million b/d expected output.
Lopez Obrador is going to be a pragmatist and will evaluate all options available for boosting oil and gas output, Abel Hibert, an economic adviser on the president-elect’s transition team, said at an event Wednesday.
“Pemex can’t do it all alone, from a financial point of view firstly and secondly from a technical know-how” perspective, Hibert said.
When asked by S&P Global Platts if a projected increase in secondary oil and gas was a clear message that Pemex farm-outs would continue under the incoming administration, Hibert responded: “Yes, definitely.”
In a meeting last week, Lopez Obrador sought the support of private operators to continue Pemex’s farm-outs to enhance recovery from mature fields, he added.
“Under Lopez Obrador’s administration, Pemex will be open to continuing farm-outs to exploit mature fields and raise output,” Hibert said.
Pemex is responsible for 80% of Mexico’s proven and probable reserves. In some cases, the company has not been able to produce oil or gas from these resources due to technical limitations or lack of funds, he added.
“The president-elect has described the decrease in oil production as an emergency, so Pemex requires all the support it can get to boost output,” Hibert said.
Pemex’s executive team under the outgoing administration of President Enrique Pena Nieto has an ambitious farm-out program in place that seeks partners for all its deepwater and most of its onshore projects.
In 2017, Pemex said it was looking to farm out as many as 74 clusters composed of 155 prospective production areas and 66 exploration areas, which would represent more than 55% of all its production and 65% of its exploration portfolio.
The company is currently tendering farm-outs for seven onshore clusters in southern Mexico. The auction will be held in February.
Due to a lack of resources, Pemex has been investing the minimum necessary to maintain operations in these areas. If the situation continues, their production will decrease to 14,100 b/d and 90 MMcf/d by 2020, data from Mexico’s National Hydrocarbon Commission show.
However, if Pemex can attract companies to come in and operate these areas, it expects to invest close to $4.65 billion over the life of the areas alongside its potential partners.
With greater resources, Pemex believes production in these areas could be raised to a combined 47,630 b/d and more-than 525 MMcf/d in the medium term.
According to CNH data, the seven clusters held a total of 191.3 million barrels of oil and 951.3 Bcf of gas of proven, probable and possible reserves in January 2017. Also, four of the seven areas have close to 450 million barrels of equivalent oil in prospective resources.
Pemex is also looking in the short term to farm out its Ayin-Batsil shallow water and Maximino-Nobilis deepwater projects. Their combined potential production peak is 280,000 b/d. The company tried unsuccessfully to auction both projects last year.
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