Mexico's Oil Production Hits Year Lowest

Mexico's oil industry commenced 2024 with crude oil and condensate production at its lowest in a year, according to the latest data from CNH. Oil production stood at 1.88MMb/d, marking the lowest level since December 2022. The decline reflects reduced production from PEMEX in fields such as Balam, Maloob, and Quesqui.

Octavio Romero, CEO, PEMEX, addressed the natural decline in oil fields during his appearance before the Chamber of Deputies in October 2023, emphasizing the need for continuous development to compensate for the decline.

The government aims to reach a production target of 2MMb/d by the end of President Andrés Manuel López Obrador's term in September 2024, although initial targets have faced revisions due to various factors, including the COVID-19 pandemic. Liquid hydrocarbon production in Mexico declined by 2.6% from January 2023 to January 2024, however, while natural gas production decreased by 4.3% during the same period, according to recent CNH figures.

In January 2024, Mexico produced 52Mb/d fewer liquid hydrocarbons than in the same month of the previous year, amounting to a total of 1.88MMb/d. Regarding natural gas, production in January 2024 reached 4.070Bcf/d, down by 183 million from the same month in 2023, when it stood at 4.253Bcf/d. The CNH also reported an average crude oil production of 1.60MMb/d, a 2.7% decrease from a year earlier, with PEMEX accounting for 95% of the production.

The number of operational oil and gas wells has decreased by 127 over the past year, resulting in a total of 6,880 wells, both onshore and offshore. This decline underscores the ongoing challenges facing Mexico's oil and gas sector, highlighting the need for continued efforts to stabilize and boost production in the face of natural decline and external factors.

Investments Surge 

Investments in hydrocarbon exploration and extraction contracts in Mexico have seen a notable increase, particularly sparked by Woodside's recent investment announcement. According to the CNH, investments in the 106 contracts held by private operators and PEMEX, granted in previous bidding rounds, amounted to US$15.06 billion as of November 2023.

CNH's report highlighted a 3.75% month-on-month rise in investments by both private companies and the NOC in exploration and production contracts, signifying a significant surge. This uptick follows a slowdown in investment pace during 2022 due to the absence of new bidding rounds, which reversed course in 2023. The year also witnessed the highest investment level since the enactment of the energy reform in 2013, with US$3.04 billion invested. 

PEMEX’s Domestic Strategy 

PEMEX is redefining its approach to fortify its presence in the national market, with a target of 83.3% of its total revenue coming from domestic sales by year's end, a substantial increase from the current 70.8%.

Under Romero’s guidance, PEMEX is growing its efforts to attain energy self-sufficiency and diminish reliance on imports, thereby enhancing the domestic supply chain. This strategic shift follows a remarkable 21.2% surge in PEMEX's market share within the country over the past five years, propelled by an expanded product portfolio.

"In our steadfast pursuit of energy self-sufficiency, we are progressively reducing our dependence on foreign acquisitions and fortifying our internal market supply,” says Romero. The state-owned firm anticipates a boost in domestic revenues this year through enriched product offerings from the new Olmeca refinery and the coking plants in Tula and Salina Cruz, targeting domestic sales to constitute 83.3% of its total revenues by the end of 2024.

According to PEMEX's reports, the Salina Cruz refinery is set to commence operations in July next year. Moreover, the Olmeca refinery is expected to commence continuous operation in March 2024, while the Tula coker plant will initiate operations this year, slated to achieve full operation by 2025.