US Election Affects PEMEX, Oil Prices RiseBy Peter Appleby | Thu, 11/12/2020 - 17:14
The US election is far from over with President Donald Trump refusing to accept the victory of democratic challenger Joe Biden. Despite this, discussions on how the change in administration could impact Mexico, and PEMEX in particular, have begun. One of PEMEX’s major investments in the next couple of years is likely to be well intervention, Rystad Energy reckons. Meanwhile, OPEC revised down its 2021 oil demand figures but good news from vaccine trials saw oil prices jump regardless.
All this and more in The Week in Oil and Gas.
The outcome of the US Presidential Election, won by Joe Biden but being challenged by President Donald Trump, could have a major impact on PEMEX’s ability to pay off its heaving debt. The consequence of the result on the Mexican peso against the US dollar could add weight to the debt, should the peso fall in value.
Added to this are the as-of-yet unknown policy decisions that the likely victor, Joe Biden, and his team will make. Though a great supporter of USMCA, as well as the original NAFTA agreement, he has recently criticized the agreement for creating a substantial trade deficit between the US and Mexico. Biden has also pushed a New Green Deal, which he says will pump trillions of dollars towards green energies. If successful, the New Green Deal could reduce PEMEX’s attractiveness and see funds turn elsewhere.
Though operators have deferred drilling plans, Mexico will see heavy investment into well intervention techniques like IOR and EOR as the country’s maturing wells demand production assistance.
Intervention activities will require investment of over US$3 billion between 2021 and 2023, with 70 percent of that money being spent in the offshore area where mature mega fields like the Cantarell Complex lie.
Mexican production has dropped consistently since its peak of 3.454MMb/d in December 2003. PEMEX and new private players have been working hard to raise production again and PEMEX is forecast to hit 1.94MMb/d by the end of the year. Intervention should play a big role in this resurgence.
OPEC’s Monthly Oil Market Report forecasts that demand in 2021 would be 96.26Mboe/d, which was a small reduction from its forecast in October, which was 96.84Mboe/d. According to the report, the lockdowns enforced in Europe during October, have forced the reconsideration. This should not lead to the type of situation seen in April, when oil prices went negative.
Despite OPEC’s report, prices have jumped since Pfizer/BioNTech announced that its COVID-19 vaccine candidate had registered a 90 percent success rate. The Mexican crude barrel has risen 12.4 percent since Monday and is now valued at US$39.15 per barrel, reports El Economista. The US WTI and Europe’s Brent mix have also enjoyed price rises of 11.6 percent and 11.03 percent respectively. WTI is at US$41.45 per barrel while Brent is at US$43.80 per barrel.