Gustavo Hernández
Director General
View from the Top

Value Focus Shapes PEMEX's Future Outlook

Wed, 01/21/2015 - 13:23

Q: What needs to happen in 2015 for PEMEX E&P to consider this year successful?

A: The Energy Reform has already been implemented and is currently being deployed. PEMEX would thus feel comfortable if solid results were seen, such as bidders competing in the different phases of Round One. This looks likely to be the case for the first phase announced in December 2014. Besides, PEMEX is showing the results of the Energy Reform by financing certain projects, reallocating recourses to focus on pipelines and valuable fields, and by ensuring that all its exploration and production projects create value.

Q: At which oil price would PEMEX be interested in investing in unconventionals?

A: In our portfolio of products, we have more attractive opportunities in areas other than unconventionals. We prefer to capitalize on deepwater, onshore, and shallow waters. We would like to honor our commitment to generate value, as this is at the core of PEMEX’s new status as a value-driven entity.

Q: How do you view the future of the North region?

A: Given current gas prices, the North region has shown that it is not attractive to allocate CAPEX to areas where the production cost will be higher than the sale price. Chicontepec also showed that too much CAPEX was spent there for small returns. We now view it as a long- term project that needs to be thoroughly studied before production. Furthermore, much of the North was removed from PEMEX’s portfolio during Round Zero, so we only need to keep working on limited areas of Burgos, Poza Rica, and Chicontepec. Finally, this was all before the budget cuts, which only confirmed that PEMEX will emphasize on areas where there is a higher bet of finding oil.

Q: What is PEMEX’s production target for 2015?

A: We aim to produce close to 2.3 million b/d plus 6 billion cubic feet of gas, or 3.4 million boe/d. This would be a tremendous output given the circumstances we face, such as the restructuring of PEMEX, the Abkatun accident, the budget cuts, the migration of contracts, preparing for the farm-outs, and dealing with the contracting rounds. Nevertheless, we will be comfortable when the Energy Reform begins showing results, as it will give us the ability to allocate CAPEX to downstream, to logistics, and to offshore activities where PEMEX needs it to go. Furthermore, we expect the oil price to rise back to the average of US$80 per barrel we saw in 2014, and we will offset the current drop by completing certain alliances. We will be preparing PEMEX to compete in the contracting rounds, where we will win some areas and we will lose others, but we will be in a highly competitive arena. Competing with the majors will make us better.