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Facing New Challenges, Oil Field Service Companies Must Adjust

By Jorge Antonio Juarez - Marcos y Asociados


By Jorge Antonio Juárez | director general - Thu, 05/12/2022 - 13:00

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Mexico has been an important global producer of crude oil and to a lesser extent, of natural gas. Currently it is the 11th-leading crude oil producer worldwide.

Most of the country’s oil production comes from PEMEX, the national oil company, and a growing portion from private companies that were allowed to develop Mexico’s hydrocarbon reserves through contracts after the Constitutional Energy Reform of 2013.

PEMEX crude oil production peaked in 2004, averaging 3.4 million Bls/day, mainly supported by the output of the two giant fields of Cantarell and Ku-Maloob-Zaap, which together accounted for 72 percent of total PEMEX production that year. As natural depletion of those fields was not offset by new developments, crude oil production experienced a steady decline and by 2021 averaged just 1.8 million Bls/day.

Source: PEMEX

For years, PEMEX has been a relevant source of budgetary resources for the Mexican government through a complex fiscal system that taxes oil production, oil fuel sales and other operations. As recently as 2014, 31 percent of the government’s total fiscal revenue came from PEMEX and its subsidiaries.

However, from 2015, as production declined, and oil and gas prices took a downturn, government tax revenues from PEMEX decreased to as low as 11 percent of total budgetary proceeds in 2020, which consequently were lower than 2014.

Source: Mexico Finance Ministry

This trend reversed in 2021 as oil and gas price levels recovered due to improving demand and, lately, because of complex geopolitical reasons that could translate into a better financial position for PEMEX and the federal government in the future.

Source: PEMEX

The present government administration has emphasized the role of the Mexican oil industry, led by PEMEX, as the key tool to promote the country’s growth and development, committing an increasing amount of investment to expand O&G production and processing in an effort to revert the decreasing trend of recent years.

PEMEX CAPEX levels that had reached US$27.0 billion in 2014, dropped to US$10.2 billion by 2017 and remained stagnant until 2019. The arrival of a new government in 2019 restored the flow of investment into PEMEX, notwithstanding the price and demand deterioration arising from the COVID-19 pandemic in 2020 and 2021. The results of this effort have not been apparent yet, but it has helped local suppliers to maintain operations through these difficult years.

Source: PEMEX

Worldwide, higher oil prices and expanding demand are stimulating oil industry operations and related services activities. E&P oil field service companies provide key technological support to explore and find reserves, drilling and formation evaluation, energy data management, geological sciences and many others, including infrastructure development and logistics to produce and distribute oil and gas to global markets. Their contributions are present with equipment and specialized services all along the value chain.


In Mexico, the oil field service sector comprises more than 350 companies in a market valued around US$10 billion per year. Participating companies include the main globally integrated players, drilling and specialized services firms and medium and small-sized companies at regional level.

For many years, these companies have been supporting PEMEX exploration and production activities. Now, they are also engaged with private operators that have been awarded E&P contracts by the federal government.

The Mexican oil industry has profited from the advanced technology and expertise that many of these companies provide for a safer, more efficient, and cost-conscious operation to remain competitive at a global level.

However, the recent political and economic impacts of the Ukraine invasion by Russia, pose new challenges that will have lasting effects in the way global markets meet their energy and raw material needs in the long run. The oil field service sector will have to adjust its goals and technologies to ensure a soft transition to the new business environment.

Photo by:   Jorge Antonio Juárez

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