López Obrador Defends Dos Bocas Costs, Private Production DropsBy Conal Quinn | Thu, 09/01/2022 - 09:45
Among this week’s top stories, President López Obrador defended the rising costs of Dos Bocas and denied corruption allegations. Elsewhere, CNH reported setbacks for private producers in July while Repsol is looking to expand offshore development by leasing an FPSO.
For all this and more, here is the week in oil and gas!
President López Obrador confirmed Tuesday that the construction of the Olmeca refinery at Dos Bocas had indeed almost doubled its initial budget, with the total cost now estimated to exceed US$15 billion. On the same day, PEMEX's Board of Directors confirmed it had requested an additional US$6 billion two weeks ago to complete unfinished work on the government’s flagship energy project, a revelation that Reuters had previously leaked at the start of this month, raising concerns about Dos Bocas’ soaring costs.
The national average production of all operators in the country producing crude oil fell 2.8 percent year-over-year, reaching 1.622MMb/d in contrast to the 1.669MMb/d in July 2021. July’s oil production fell for the first time since a recent low point in April, dropping by 0.13 percent compared to the average of the previous month. However, private contracts caused the decrease this time instead of PEMEX, reported the National Hydrocarbons Commission (CNH).
This week, CNH released its monthly extraction report, which showed that oil and gas production for private operators fell for the first time in two months. In July, oil production fell by 2Mb/d the month previous, to an average of 1.74Mb/d, largely due to lower pumping rates from private companies. By contrast, PEMEX’s production saw a 0.35 percent increase of 6Mb/d compared to the same month in 2021. The latest average output of 1.69MMb/d has put the NOC on track to surpass 1.7MMb/d next month for the first time since before the effects of the pandemic were felt in April 2020.
Repsol has launched negotiations with contractors to lease a Floating Production, Storage and Offloading (FPSO) vessel as part of its plans to expand offshore development in the Gulf of Mexico. The Spanish IOC is keen to make further progress in Block 29 where the noteworthy Polok discovery and smaller Chinwol prospect are located. Market sources cited by Upstream report that Repsol is specifically looking to lease a front-end engineering and design contract for a medium-size FPSO, big enough to permit either Suezmax or Aframax tanker dimensions, with oil production capacity for about 60,000b/d of oil plus associated gas production and vessel size.
Between the end of 1H21 and 2H22, only 147 service stations have been opened in the country because of a lack of permits from the Energy Regulatory Commission (CRE). CRE still has approximately the same number of establishments in the permitting process, of which the halted investment stands at around US$7.45 billion, explained representatives of the National Organization of Petroleum Sellers (ONEXPO).
Oil and income tax collection continues to sustain Mexico’s budget revenues, according to the Public Finance and Public Debt Report from the Ministry of Finance and Public Credit (SHCP) for July 2022. These two sources have been the most prolific for some years now and continue to be, even as soaring oil prices caused the government to lower its taxes on fuels, a situation that benefit oil revenue but harmed the gains from income taxes.
Tesla CEO and world’s richest person Elon Musk backed additional efforts to drill for natural gas and oil in the short term, in line with his recent change in tune on the use of non-renewable sources like fossil fuels and nuclear energy.
The warning came after it was reported that the Conservative Party leadership candidate will approve up to 130 new drilling licenses in one of her first acts as prime minister if she were to be elected. Either Truss or Rishi Sunak will be named as Boris Johnson’s successor in Downing Street on Sept. 5, 2022. It is believed that Truss, on entering No. 10, will also push oil and gas firms to invest in existing sites to maximize production.
Texas’s top oil and natural gas regulator adopted a new set of weatherization rules more than a year and a half after a deadly winter storm hit the state and left millions without power for days and killed more than 200.