Can PEMEX Reach its Targets?Wed, 01/25/2012 - 09:49
Q: Pemex’s two stated long-term upstream ambitions are to reach its 3 million bbl/day production target by 2016, and maintaining a 100%+ 1P reserve replacement rate. Will this be possible under Pemex’s current budgetary restrictions? How will you prioritize this situation?
The key phrase in this question is ‘budgetary restrictions’. It is a simple situation: if we do not have enough money, we will not be able to achieve our targets. The amount we will need to invest is well laid out. Currently, Pemex’s development cost per barrel is around US$15. In the years to come, this will increase to something between US$17 and US$18. Currently, we are producing 1.28 billion Boe per year. By multiplying one figure by the other, we come to the conclusion that we will need an annual budget of between US$24 billion and US$26 billion in the coming years in the upstream. With that kind of funding, we will be able to reach our objectives.
What is also clear is that we cannot increase production to 3 million bbl/day without ensuring that our reserve replacement rate remains above 100%. The way that Pemex reached its productive peak of 3.4 million bbl/day was not sustainable, as we reached it by pushing production too hard. However, we started to make amends and as a result, the overall production decline was not as bad as the decline at Cantarell. We could reach our target of 3 million bbl/day right now, by pushing Ku-Maloob-Zaap in the same way that we pushed production at Cantarell, but we want to maintain a stable and sustainable production platform at KMZ until at least 2017. If we want to maintain stable production for the years to come, we need to ensure that whilst aiming for higher production, we simultaneously maintain the reserve replacement rate.