Mexico Delays OPEC Production Agreement

Going against OPEC+ negotiations, Ministry of Energy Rocío Nahle objected to reducing Mexico’s production. The proposal is that Mexico cuts 400Mb/d against its production rates reported in October, which would leave Mexico's production at 1.25MMb/d. As a whole, OPEC members and invitees agreed to cut 10MMb/d for the next two months, beginning in May and ending in June, Reuters reports.

While many private and national operators are already cutting sizeable amounts from their planned spending, idling rigs and adapting drilling plans, PEMEX is sticking to its plan of increasing production. The NOC has been fighting a consistent decline in oil production for years now and seems bent on turning things around despite the oil price crash. President Andrés Manuel López Obrador, after all, promised that Mexico’s oil output would hit 2.6Mb/d by 2024, at the end of his six- year term in office. These figures were established long before the industry collapsed against anyone’s guess. Taking this into consideration, it is noteworthy that PEMEX has not changed its priorities.

The Mexican NOC is on an ambitious mission: last year it aimed to develop 20 new “priority” oil and gas fields, before developing 10 more in the coming years. Even though analysts believe this annual rate of discovery and development would be challenging to maintain, PEMEX identified 20 projects in 2019. Their development, however, is behind schedule and in January, media reported that only three of these fields would begin production before the end of the current year.

The global oil and gas industry is expected to slash US$100 billion in exploration and production spending in a 17 percent year-on-year drop, according to consultancy Rystad Energy. AsBrazil's Petrobras and Colombia's Ecopetrol have both slashed capital spending and Petrobras went as far as shutting in 200Mb/d of unprofitable production due to the country’s lack of capacity