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News Article

PEMEX Well Falls Short on Priority Fields Promise

By Peter Appleby | Fri, 05/29/2020 - 17:48

Data from CNH has revealed that PEMEX is a long, long way off from fulfilling the promise and zeal shown in the first year of President Andrés Manuel López Obrador’s administration by missing its production target on 22 “priority” fields by 75 percent, reports El Economista.

In 1Q20, the NOC produced 21.8Mboe/d of the intended 89MMboe/d from 17 of the 20 fields that were put into production during 2019.

The company has only drilled five of the 15 wells that it set out to do between January and March of this year, while investing only 44 percent of the intended MX$11.82 billion (US$530 million) budget, reports Forbes. Potential farmouts or partnerships with private industry on the priority fields were ruled out in favor service contracts, reports the publication.

Results are disappointing for the administration, which is a fierce defender and supporter of PEMEX and has made the “rescue of sovereignty” its energy priority. Priority fields were set to be a central part of PEMEX’s revitalization.

President López Obrador was and remains an aggressive critic of the Energy Reform passed by his predecessor, former President Enrique Peña Nieto. Rather than seeking to leverage from skills of private international players, the president has bet on the revitalization of the world’s most indebted national oil company. At present, there appears to be little turnaround in the company’s fortunes.

However, as the arrival of COVID-19 has likely brought peak oil forward, the country must act now to produce value from a resource that may not provide the same wealth in the coming years. Rystad Energy’s Schreiner Parker pointed to this issue in a recent Mexico Oil and Gas Review (MOGR) interview: “The country must understand that oil has a finite value. If there is still oil in the ground in 2060, it may be worth nothing. Mexico is at a turning point and we hope that it does not miss out on what could potentially be the last big wave of oil and gas investment.”

The health of the NOC is not its own concern but also one that has an impact on the companies that serve it. Alfredo García of Sie7e Energy, a company that works to attract international investment into the country’s energy sector, told MOGR that the NOC’s health has caused problems through the supply chain. “Sie7e Energy has seen that the long wait times for payments from PEMEX to service providers have not improved Mexico’s attractiveness. Service providers are often paying their own operations from their own pockets and PEMEX payment times are getting longer,” he said.

According to Forbes, CNH commissioners explained that the poor results are due to the lack of platforms and infrastructure needed to carry out the works. Commissioner Alma América Porres reportedly said that the results “leave you speechless” and were due to lack of poor planning.

Peter Appleby Peter Appleby Journalist and Industry Analyst