OPEC’s World Oil Outlook 2020, in which the group gives predictions up to 2045, has forecast that Mexico’s liquids supply will see a long-term decline that will put the country’s production below today’s output, despite the importance that the Mexican government has placed upon reviving the country’s oil industry with PEMEX at its center.
The OPEC report, published today, said that PEMEX and recent private interests had been successful at stopping the country’s decade-long oil decline, but that “total liquids supply in Mexico is projected to remain relatively flat over the medium-term, averaging 1.9MMb/d, albeit with a dip to 1.8MMb/d in intervening years.”
Due to deeply-rooted concerns including PEMEX’s huge debt of over US$100 billion and additional challenges posed by COVID-19, “Pemex is struggling to meet its own commitments according to its business plan.” This fact, coupled with the NOC’s need to focus on cheaper developments in onshore and shallow water areas rather than “potentially bountiful” deepwater zones means the group projects “Mexican liquids supply to modestly decline in the long-term, to 1.6MMb/d by 2045.”
The 1.6MMb/d liquids supply forecast for 2045 is lower that the country’s recent national production. In August, national production sat at 1.6337MMb/d of crude, down from a high in March of 1.7468MMb/d. However, the report also offers a Higher Supply Case, posing the possibility that Mexico’s “deepwater potential is more successfully tapped and total supply touches 2MMb/d again in the latter part of the 2020s”.
Mexico’s liquids supply future is not extraordinary considering the other major changes to energy supply that OPEC predicts. Underlining a recent trend, the group says that oil and gas’ participation in global energy will weaken despite the demand for oil growing from 100MMb/d in 2019 to 109MMb/d in 2045. A growing global population will see overall energy demand increase “by a significant 25 percent in the period to 2045.”
Oil will still be the primary source of global energy in 2045, though its market share will fall to 27.5 percent, while natural gas will contribute 25.3 percent by 2045. Coal will drop from 26.7 percent today to 25.3 percent by 2045. At the same time, solar, wind and geothermal energies will outstrip growth of any other fuel type at 6.6 percent per annum on average between 2019 and 2045, contributing 8.7 percent by 2045.
The suggestion that oil and gas’ role in global energy supply is declining is widely accepted by the industry, with many experts suggesting that peak oil has been and gone. Oil majors, including BP and Shell have taken meaningful steps to expand their renewable interests while writing off oil and gas assets worth almost US$40 billion this year. OPEC notes that government policies relating to energy, particularly from OECD nations, will become more stringent towards 2045, with Paris Accord objectives a central consideration in intervening years.
The MORENA government remains firm in its PEMEX focus regardless of the recent oil demand drop and subsequent price collapse. Suggestions from the IMF that the government should postpone the construction of the US$8 billion Dos Bocas refinery and instead focus investment on profitable fields was shrugged off by government officials. Minister of Energy Rocío Nahle said that previous recommendations to stop investment in oil and gas infrastructure had resulted in Mexico’s dependence on other nations for gasoline today.