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News Article

Energy Development: Backbone of Government Policy

By Cas Biekmann | Thu, 10/29/2020 - 18:25

You can watch the video of this presentation here.

“We need to recognize the hard lessons and challenges COVID-19 has presented us,” Manuel Rodríguez González, President of the Energy Commission in the Chamber of Deputies, said during the last intervention of Mexico Oil and Gas Summit 2020. While there has been a drop in oil prices and demand, Rodríguez referenced several experts on the matter including IEA that believe crude oil demand will peak in 2030. After that, the drop will be somewhat steep, resulting in 45MMb/d by 2050. Natural gas, however, will increase in importance toward the future, as the fuel for the energy transition. Meanwhile, renewable energies will be the long-term winners due to their low emissions.

Rodríguez stressed that several factors could influence the role of oil and gas in the global energy mix even further and that major countries would shape the path ahead. Countries like China, for instance, could potentially reach net zero emissions in 2060 by using clean energy. Rodríguez said the upcoming US elections were also of importance because for Trump, producing shale gas would be a staple. “Biden, on the other hand, has decided to opt for clean energy in order to stem emissions,” he noted.

But oil is not sidelined yet. “Today, global systems still rely on oil. This will be the case for the foreseeable future. After all, if we stopped producing oil and gas today, we would face severe repercussions tomorrow. Therefore, it still makes sense to focus on producing crude oil in Mexico through PEMEX.”

One major issue PEMEX faces is its decline in production, which has become apparent for many years now. Extensive action has been taken by the López Obrador administration to reverse the production drop but the pandemic did not help and results could clearly be seen in 3Q20. The widely discussed OPEC negotiations proved a further hurdle for the NOC. Nonetheless, Rodríguez mentioned that PEMEX aims to produce 1.9MMb/d by the end of 2020 with its 18 newly producing fields. Seven more fields are expected to yield results soon after.

In 2021, PEMEX will receive a substantial budget as a result of increased production, with which it aims to contribute 5.18 percent of Mexico’s GDP. The NOC wants to produce over 1.94MMb/d in 2021. By 2024, production should climb up to 2.36MMb/d. Nonetheless, the impact of the pandemic remains uncertain. “We cannot leave out the contributions of private oil producing companies in Mexico, who are expected to produce around 280Mb/d by 2024”, Rodríguez added.

The President of the Energy Commission noted that measures had been taken to provide more breathing room for PEMEX and that renewable energy was still an important element for the Mexican government. “The core of the Energy Reform is still intact,” he said. International collaboration is needed to come up with a new, resilient and sustainable energy model at a global scale, which Mexico supports.

Cas Biekmann Cas Biekmann Journalist and Industry Analyst