Friday, February 22, 2008

Mexican Production

Mexican Energy Reforms on Horizon
By Randy Woods
Feb. 21, 2008

Mexico’s political leadership is building on the momentum created by last year’s passage of several reforms to the state-controlled energy sector. Mexico’s congress is now considering proposals that could break the monopoly of state oil company Pemex over refining and transportation operations. Perhaps more important are proposals that would allow Pemex to partner with other companies in promising new regions, especially offshore. Pemex’s falling reserves and production, as well as its financial problems, have created a sense of urgency for reform, so some form of change is likely.

Change is needed in Mexico, where production is declining at Cantarell, its biggest oilfield. Overall reserves are dwindling away, and operational and financial problems are plaguing Pemex, which posted some $1.3 billion in losses during the third quarter of 2007. According to Pemex’s December 2007 figures, Mexico’s production declined 8.3 percent to 2.9 million barrels per day of crude in November 2007, down from 3.16 MMbbl/d in November 2006. Given Pemex’s current reserve replacement ratio of roughly 50 percent, the company has just nine years of production left. And according to an energy ministry forecast, by 2016 oil production could drop by a third if something is not done to fix the problem.

Last year’s fiscal reforms (which will reduce Pemex’s tax burden by up to $3 billion per year) were a good start. The Senate Energy Committee, led by Francisco Labastida Ochoa of the PRI, is hammering out a deal that could allow Pemex to contract out operations of its refining, transport, and distribution infrastructure. That would permit other companies to invest in Mexico’s infrastructure and let Pemex focus more on its upstream operations. Other proposed reforms include allowing Pemex to partner with other companies to jointly perform exploration and even production, enabling it to exploit its promising deepwater areas, long viewed as the answer to Cantarell’s decline. According to the ministry, deepwater production could start by 2014 at a rate of 19,000 bbl/d, increasing quickly to 174,000 bbl/d in just two years.

Pemex Says January's Daily Oil Output Little Changed
By Andres R. Martinez
Feb. 21 (Bloomberg)

Petroleos Mexicanos, the state-owned Mexican oil monopoly, said daily crude oil production in January was little changed from December. Output at its largest field, Cantarell, fell to the lowest in more than eight years.

Output rose to an average 2.957 million barrels a day from 2.954 million barrels in December[??? Jan], Mexico City-based Pemex, as the company is known, said today in an e-mailed statement. Production fell 5.9 percent from January 2007.

Crude output fell short of a company goal of 3.1 million barrels a day. Production may fall to 2.8 million barrels this year because Mexico does not have production capacity to make up for the decline at Cantarell, its largest oil field, according to Cambridge Energy Research Associates, a consulting firm.

``In the short term, there are not many alternatives,'' said Alejandra Leon, an analyst with CERA in Mexico City. ``It has been very difficult finding projects that could replace the magnitude of the fall at Cantarell.''

Crude output at Cantarell, the third-largest crude field in the world, fell 1.3 percent in January from the previous month to 1.24 million barrels daily, the lowest since December 1999. The offshore field accounted for about 42 percent of Mexico's oil output in January. The field peaked in December 2003 at 2.19 million barrels, or about two-thirds of Pemex's production that month.

President Felipe Calderon will present his plan to open the oil industry to private and foreign investment next month, said Energy Minister Georgina Kessel on Feb. 14. Mexico must begin exploring in waters deeper than 1,500 meters to help counter the decline at Cantarell and replace reserves.

Kessel set a goal of raising the rate of replacement of proven oil reserves to 100 percent by 2012. The company's reserves may run out in 9.3 years if the goal isn't met, she has said.

Crude exports fell 4.1 percent to 1.434 million barrels a day in January from December after closing export terminals multiple times because of stormy weather. Exports to the U.S. fell 1 percent to 1.146 million barrels a day. Pemex is the third-largest supplier of crude to the U.S.

Natural gas output reached a record 6.534 billion cubic feet a day last month, the company said.

Links to Mexico Charts:

October 2007

Jan 2008

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