The Week in Oil and Gas: Prices Falter as Coronavirus SpreadsFri, 01/24/2020 - 17:57
Oil Prices Unsure After Coronavirus Outbreak
Global oil prices have fallen amid concern around the outbreak of the respiratory virus, known as Coronavirus, that originated in the Chinese city of Wuhan. The virus has now spread to several Asian countries, Europe and the US and is causing concern over oil prices as demand is set to fall.
To control the virus, travel bans will be put in place and, particularly in Asia, public transport use will be curtailed. This is likely to see demand fall, and with it, prices. On Thursday, WTI prices fell US$0.85 per barrel or 1.5 percent, while Brent fell U$S0.76 or 1.2 percent.
Production in 2019 Drops but Privates Increase
National oil production in Mexico ended last year at a disappointing average of 1.679MMb/d despite efforts from the national government and the implementation of the PEMEX Business Plan. This figure represents a drop of 7.2 percent against 2018’s average production and short of the 1.711MMb/d forecast in the Business Plan.
Meanwhile, private production rose 48 percent to a combined average of 84.3Mb/d, though PEMEX remained responsible for 95.1 percent of the total national production.
Private Contract Investment Hits New Heights
Figures released by CNH show that investment from privates in Mexico’s oil and gas industry has hit US$38.798 billion. Most of this amount has been invested in shallow waters (some US$26.994 billion), while US$8.367 has been channeled toward onshore and the remaining US$3.437 to deepwater developments.
So far, only US$11.579 billion has been spent. AMEXHI President Alberto de la Fuente explained that due to the timeframe for oil and gas developments, investments can only be spent so much. Accurate results would be available in 2024, he said.
Discussions Continue on Zama
Zama consortium partners Talos Energy and Premier Oil, who work alongside Wintershell DEA on Block 7, are encouraging PEMEX to carry out its assessment of the Zama field in order to determine who will operate the discovery.
The NOC and the block consortium are in discussions over a unitization agreement for the reservoir that stretches into both group’s territories. Oil and gas consulting firm Netherland Sewell & Associates recently completed an independent assessment of Zama on behalf of Talos and its consortium partners. PEMEX must now finish its own in order to continue with unitization discussions.
Talos Energy, the operator at Block 7, is hoping to reach a Final Investment Decision soon as the company moves towards first oil in 2023.
PEMEX Goes to Market
The national oil company this week placed two bonds, each of US$2.5 billion, on the international capital markets in an attempt to refinance and reduce its overall debt which, as of September 2019, stood at US$99.6 billion. The company hired the help of nine international agencies, including BBVA, Morgan Stanley and BNP Paribas to help place the debt security instruments.
According to reports, investment interest has so far come from Latin America, the US and Europe.