Private Companies Decrease Production; PEMEX Grows Fuel Oil Stock
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Private Companies Decrease Production; PEMEX Grows Fuel Oil Stock

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Perla Velasco By Perla Velasco | Journalist & Industry Analyst - Tue, 12/06/2022 - 15:40

Private oil production decreased in October, as private companies produced 105Mb/d, a month-over-month decrease of 7.5 percent according to CNH. Fieldwood Energy and Petrobal reported a 27 percent decrease in production at the Ichalkil and Pokoch fields compared to September: The companies extracted 16Mb/d in October. Furthermore, PEMEX increased its fuel oil stock in October, reaching 1.25MMb in the last week of the month.

According to Bloomberg, 80 percent of private production is carried out by Eni, Fieldwood and Hokchi. Nevertheless, Fieldwood cramped the levels of private oil production. In Mexico, state-owned PEMEX is responsible for 94 percent of production, while private companies represent 6 percent of the production. President Andrés Manuel López Obrador set a goal for private companies to produce 280Mb/d with the Mexican Association of Hydrocarbon Companies (AMEXHI), but the latter might redefine this projection. AMEXHI projected production of 209Mb/d for 2022, yet so far the current production estimation is 49 percent below this goal, with 105Mb/d.

In October, the National Refining System (SNR) increased its production. In September, the SNR processed 780Mb, while in October it increased production to 809Mb, a 3.7 percent rise. At the same time, fuel oil production reached its second-highest level in the year with 272Mb/d, a decrease, in comparison with September of 2.5 percent. In addition, gasoline imports increased by 17 percent, and natural gas imports by 15.5 percent.

Mexico’s fuel oil commercialization strategy became more complicated when the International Maritime Organization (IMO) implemented a new regulation that prohibited ships to use fuel oil with more than 0.5 percent sulfur, criteria that PEMEX’s fuel oil does not meet. The increase in the production of fuel oil did enable the Federal Electricity Commission (CFE) to produce more power to lower prices, despite expert opinion over the disadvantages of utilizing this fuel to create electricity due to the pollution it generates. 

As reported by the National Institute of Ecology and Climate Change (INECC), fuel oil’s cheap levelized cost of energy (LCOE) makes the fuel an easy option to create energy, but the feasibility of this option depends on Mexico’s investment in infrastructure. President López Obrador has said that the modernization of refineries will make Mexico self-sufficient in energy.

Recently, operations at the Dos Bocas refinery got delayed until 2023. Industry experts have stressed that the country's goal of being energy self-sufficient by 2024 seems unattainable due to the state of the country's refineries and delays in key projects such as the Olmeca refinery. According to Rocío Nahle, Mexico’s Minister of Energy, the Dos Bocas 2022 production date goal has been postponed until next year, as safety tests are being carried out to avoid future accidents.

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