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Pemex production decline continues despite government stimulus

Eunice Adorno/ AFP /Strafor

Pemex Cantarell field in the Golf of Mexico.

- Crude output falls to 1.68 million b/d in May, still above 2019 low
- Gross natural gas production rises 25 MMcf/d to 4.84 Bcf/d

By J. Robinson / Platts

Petroleumworld 06 26 2019

Mexico's state-owned producer Pemex reported a continued decline in its crude oil production last month, which was partially offset by a modest uptick in condensates, natural gas liquids and gas output.

In May, the company produced 1.68 million b/d of crude, down just a fraction of one percent from output at 1.69 million b/d in the month prior, statistics released late Monday showed.

Aggregate production of condensates and NGLs totaled over 221,000 b/d, an increase of just 600 b/d from the April average. Total liquids production at Pemex in May was lower for the third consecutive month at 1.9 million b/d, but remained higher compared to an annual low in January at 1.86 million b/d.

Gross gas production at Pemex edged up to 4.84 Bcf/d in May, rising about 25 MMcf/d compared to the prior-month average. With the state producer continuing to consume a significant portion of its own output for reinjection into existing wells -- a practice known as enhanced oil recovery, or EOR -- the volume of dry gas production marketed domestically fell to 1.62 Bcf/d in May, down from 1.66 Bcf/d in April.


Continued declines in oil and gas production at Pemex stand in stark contrast to recent objectives outlined for the company by Mexico President Andres Manuel Lopez Obrador.

After allocating a $1.5 billion stimulus package to the company earlier this year, Lopez Obrador has declared his intention to see Pemex increase its oil production to 2.4 million b/d and its gas production to a gross 6.5 Bcf/d by 2024.

The cancellation of recent joint-venture auctions for Pemex by Mexico's Comision Nacional de Hidrocarburos, though, has raised concerns about the government's new strategy for the company.

Earlier this month, the commission announced the cancellation of a farmout previously scheduled for October of seven onshore production areas where oil and gas production has lapsed in recent years.

In December, the CNH cancelled upstream auction rounds 3.2 and 3.3, scheduled for February. At the time, the administration argued that Mexico needed to evaluate existing contracts granted to private investors as well as the country's energy policies.

The commission's most recent joint venture cancellation drew criticism from some of its members at the time who have argued that the government's aggressive production goals for Pemex would be unachievable without private investment.

"Cancelling the tender of these areas is a bad signal," Commissioner Sergio Pimentel said, emphasizing the risk it posed to Mexico's ability to further attract and secure private upstream investment.

Last week, participants at a petroleum industry conference in Houston echoed those concerns.

More frequent upstream auction would lead to more diverse operations and help speed production timelines, according to Kartik Mutnuri, Shell exploration manager for Mexico.

"We support more rounds," he said. "More than anything else, it will increase production in the country."

Story by J. Robinson from Platts S&P Global. / 06 25 2019


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