Volatile Oil Price and Huachicol Threats Linger

The rising tide of COVID-19 cases in several European and Asian nations saw prices drop as memories of the demand destruction seen earlier in the year lingered in the minds of traders. Meanwhile, fuel theft remains a major problem in Mexico and one that the government must solve if it is to claw back billions of pesos in lost revenue. Finally, operators gave updates on their developments and offered insights into what is to come in the year ahead.

All this and more in The Week in Oil and Gas!

COVID-19 Cases Play Seesaw With Oil Prices

The world passed a desperate 1 million COVID-19 deaths this week. With that, oil prices fell.

Markets have shown signs of nerves over the past week as countries reported what appears to be a second wave of outbreaks, with the UK, France, the Netherlands and Indonesia all reporting record highs in positive cases, leading to price drops on Tuesday. WTI fell US$1.31 to US$39.29 per barrel, while Brent dropped US$1.40 to US$41.03 per barrel. The Mexican mix also had lost US$0.96, falling from US$38.15 per barrel to US$37.11.

Huachicol Has Not Gone Away

Fuel theft, or huachicol as it is locally known, continues albeit at a slightly lower rate despite efforts from the federal government and PEMEX.

Between January and August this year, 6,539 fuel thefts were reported in comparison to the 7,655 reported between January and August 2019.

This multi-billion-peso illicit industry has spawned a litany of violent cartel groups, including Guanajuato’s Santa Rosa de Lima cartel, and led to disastrous events including the Tlahuelilpan pipeline explosion that killed 73 people in January last year.

Despite this, very few of those involved faced punishment. According to El Universal, “the number of people presented (in criminal court) between 2016 and August of this year totals 473, but only 98 are in prison. That is only two out of 10 detainees.” 

Operators Show Progress

Though the crisis caused by COVID-19 has forced many operators to pause activities and cut back on CAPEX, operators are pushing ahead with projects in Mexico.

Shell Mexico, Cairn Energy and Jaguar E&P saw progress this week with Shell’s Director General for Upstream Development Pablo Tejera Cuesta explaining that the company had already drilled and completed two wells this year and that drilling would begin again very soon.

Cairn Energy also reported the completion of two wells for this year and said that together with Eni, the company was “working to appraise the discovery and to exploit nearby synergies to assess the potential for a commercial development” on Block 10.

Jaguar E&P had its exploration plan on BG-09 contractual area approved by CNH, which could see the company invest US$34.25 million.