Mexico’s Oil Output Declines Amid Rig Decommissioning Trend

Mexico’s oil production continues on a downward trajectory, with the country producing just 1.615MMb/d of liquid hydrocarbons in 1Q25. This marks an 11% drop compared to the 1.819MMb/d recorded during the same period last year. Industry experts point to the systematic decommissioning of oil rigs across the country as one of the key factors driving this persistent decline.

Recent data from Baker Hughes' International Monthly Rig Count report for June reflects a stark reduction in active rigs. Mexico now has only 17 land rigs and 10 offshore rigs operating, totaling just 27 active rigs nationwide. This figure represents a sharp 45% decrease compared to the 49 active in June 2024, underscoring the rapid contraction of drilling activity that is putting increasing pressure on national production levels.

The steep decline in rig activity is a growing point of concern across the industry. Rafael Espino, President, Mexican Association of Petroleum Service Companies (AMESPAC), warns that Mexico’s heavy reliance on mature, declining oil fields and the sharp drop in drilling activity are the core issues stifling production growth.

According to PEMEX, the number of completed oil wells dropped by 53% year-over-year, falling from 41 wells in 1Q24 to just 19 in 1Q25. Of these, only 13 were development wells located within proven fields, while a mere six were exploratory wells in new reserves. Espino notes that this reversal of the traditional ratio, where exploratory drilling typically drives long-term growth, signals a pivot away from immediate production toward a riskier bet on future upstream opportunities.

Further compounding the issue is the sharp decline in PEMEX’s rig deployment. Company data shows that active rigs fell from 56 in May 2024 to just 24 by May 2025, with the number of development drilling rigs plunging 65% in the same timeframe. Exploration rigs also dropped by 37%, leaving only 10 active rigs in the field as of May 2025. This sustained decrease in drilling activity poses a serious threat to PEMEX’s ability to replace reserves and maintain production in the short term, says Espino.

“These figures are not a red flag, they are a roadmap. Current production levels are not the result of structural gains, but of intensified reliance on assets in decline,” says Espino. “To meet the 1.8Mbd target set for 2025, it is imperative to ramp up drilling and compress the discovery-to-first-oil timeline.”

Declining production translates to shrinking revenues for the NOC, which in turn limits the capital it can reinvest in new drilling projects, says Raphaël Siri, CEO, Fontis Energy, a Mexico-based offshore drilling company that operates five high-spec jack-up rigs, most under long-term contracts with PEMEX. “Drilling is not something you can stop and start overnight, shutting down a reservoir is a bit like rebooting a system; it takes time and care to bring it back online,” says Siri.

The reduction in active rigs has also sharpened the focus on Mexico’s future prospects, particularly in deepwater operations. However, successful deepwater development requires exceptional planning and flawless execution, as even minor errors can result in costly, unviable operations, says Siri. “Right now, Mexico is not fully ready for deepwater development, at least not if it is approached the same way as onshore or shallow water projects. Everything is amplified in deepwater: timelines, risks, and the potential costs of mistakes,” he adds.

While Mexico may have the expertise, workforce, and private sector interest to reverse the production decline, the bottleneck remains PEMEX’s limited financial flexibility to contract private rigs and accelerate new drilling. “In many countries, the main challenge is a lack of oil and gas resources, but that is not Mexico’s situation,” says Siri. “The resources are here; they just need to be developed more efficiently.”