Deer Park Quickly Becomes Boon to Energy Sovereignty

Deer Park’s historic output puts Mexico on track to achieve energy sovereignty, but the country’s Gulf of Mexico-based production is likely to fall short of ambitious goals set in 2019 and 3P reserves stagnate with limited new discoveries made. 

Ready for more? Here is the week in Oil and Gas! 

Deer Park’s New Milestone Gives Boost to Energy Sovereignty

On the hundredth day following the acquisition of the Deer Park refinery in Houston, Texas, PEMEX CEO Octavio Romero Oropeza celebrated its progress and highlighted the project’s US$19 million profits during 1Q22. After Deer Park’s purchase, the government emphasized that the refinery would be a boon to Mexico’s desired energy sovereignty. Romero attributed this production milestone to the high levels of oil processing, refining 282Mb/d of crude oil and producing of 294Mb/d of oil products, of which 84.2 percent are refined products like gasoline, diesel and jet fuel.

PEMEX Likely to Fall Short on Production Despite GoM Resurgence

According to the data provided by the national upstream regulator CNH, PEMEX has failed to reach the production goals that it had set in its Business Plan in 2019. Some experts say that initial expectations were unrealistic from the start, while others point out that there is still potential in offshore areas in the Gulf of Mexico (GoM), although the US side of the gulf appears to be performing better.

Fuel Imports Represent Higher Spending for PEMEX

Although PEMEX benefitted from the increase of crude oil prices, this also translated to higher spending on the import of fuels, as the NOC spent 83.3 percent more on fuel imports in 1Q22 compared to 1Q21. 

President Insists Subsidies Stave off Inflation, Maintain Growth

President López Obrador insists his policy regarding the Special Tax on Products and Services (IEPS) is helping to manage fuel prices and control inflation. Nevertheless, experts still question the long-term viability of the tax benefits.

Need for Exploration Builds Up as 3P Reserves Remain Stagnant

During 1Q22, the total number of PEMEX wells in operation sat at 6,656, a 4.45 percent decrease from 2021’s 6,959. However, the NOC did break a streak of three consecutive quarters of stagnation, recording an increase of 4.93 percent compared to 4Q21. 

PEMEX Tenders E&P Services at Onshore Cuitláhuac Field

This week, PEMEX Exploration and Production (E&P) published a call for bids for an Integral Exploration and Extraction Services Contract (CSIEE), the latest modality for service contracts. The tender is part of the NOC’s wider strategy to boost production levels.

Private Production: Eni Faces Setback as Fieldwood Fosters Upturn

As Italian oil giant Eni reported its lowest production levels to record, the US-based Fieldwood Energy experienced a breakthrough, ushering in its leading production position for the private oil production sector in Mexico. While the international industry of oil and gas is still heavily influenced by the progression of the conflict between Russia and Ukraine, the North American company has entered a privileged stage, of which only time can determine its longevity.

Oil Spill in Salina Cruz Affects Fishers

Salina Cruz’s fishers are demanding PEMEX to stop a crude oil spill and attend environmental damage in Oaxaca. They protested at the Antonio Dovalí Jaime Refinery and asked PEMEX to facilitate a discussion, as well as to provide an explanation regarding the recurring spills registered in March and April 2022. The oil spill has caused economic and environmental damages to the communities living in the Salina Cruz municipality, leading habitants to organize a protest. 

Oil Workers Protest PEMEX’s Alleged Labor Agreement Violations

On April 25, Mexico’s Oil Workers Union (STPRM)’s 36 sections called for a peaceful protest as a response to alleged violations of the Collective Labor Agreement (CCT) by PEMEX leadership.

Should PEMEX’s Rulebook Change?

In a 1Q22 briefing sent to investors and submitted to the Mexican stock exchange (BMV), PEMEX admitted that its anti-corruption rules and guidelines “might prove insufficient”, according to a report from El Universal. The NOC goes on to explain that “it cannot guarantee the prevention of intentional acts of imprudence or negligence on the part of its administration’s managers or employees.” It also made clear that this warning extended to its contractors, its service providers and “any person that does business with PEMEX.” 

Fuel Shortages Impact Several Regions of Mexico

The number of cities across Mexico facing fuel supply shortages is increasing. While previously limited to the Northernmost states, and blamed largely on US nationals taking advantage of cheaper, subsidized fuel prices south of the border, gasoline and diesel shortages have now reached as far south as the state of Veracruz.

International Headlines:

Japan’s Kishida says phasing out Russian Oil Will Take Time

The Japanese PM made the comments following a meeting with Group of Seven leaders to impose a ban on crude over the Kremlin’s invasion of Ukraine.

Modec Tries to Muscle in on Guyana Turf in New ExxonMobil Floater Contest

Floater companies engaged in pre-FEED competition for fifth development in the Stabroek block.

Mike Pence Bashes Socially Conscious Investing Principles

The former US Vice President criticizes campaigns that would force companies such as Exxon Mobil to follow socially-conscious investing principles, saying they elevate 'left-wing' goals over the interests of businesses.