The Week in Oil & Gas: Increased Production and Stronger Demand

Despite the lack of investment in certain sectors, crude oil production in Mexico looks promising. Demand for oil has presented a worldwide increase which is set to remain for the rest of the year. Meanwhile, the European Investment Bank (EIB) steps back from funding fossil fuel projects. 

Fueled enough for the news? Check out what made the headlines over the week!

MEXICO

    “Mexican Oil Jewel” to Generate US$28 billion in Government Revenue

After uncertainty concerning the government's intentions regarding Zama erupted, it was announced that the Mexican government will receive US$28 billion derived from the activities carried out by Talos Energy at the field. According to Loren Long, Vice President of Talos Energy, this amount includes tax payments, royalties and shared production from the Wintershall DEA, Premier Oil and Talos Energy partnership.

Zama is considered an oil jewel because of its prospective resources estimated at between 400 and 800 MMboe. The field contains light crude oil, which is more profitable than the heavy one that Mexico normally produces.

     EK Balam Production to Increase by 36 Percent

Ek Balam, considered the most important field operating under a shared production contract, plans to increase oil production by 36 percent. With an investment of US$1.2 billion, it is projected to reach 68Mb/d by 2020.

CNH approved the work plan and budget for this contract and PEMEX will drill 12 new wells. In addition, 12 wells that are already under construction will be completed, as well as 13 interventions to the 27 wells that already exist and produce 50Mb/d.

      Unscheduled Downtime Slows PEMEX´s Productivity

PEMEX refineries registered 37 unscheduled shutdowns in October, an average of six per refinery, which was the highest monthly level this year. According to the PEMEX Model for Operational Excellence, these shutdowns are caused by failures in operation and maintenance resulting from delays in major repairs, in addition to the lack of investment in refining. For 2019, almost US$3 billion were authorized for refining but US$2.5 billion were allocated to the new Dos Bocas complex.

INTERNATIONAL

      Petrobras, the Highest Producing NOC by 2030

The Brazilian state company is currently the third company with the highest oil production in the world with production of 2.2MMb/d . Nevertheless, predictions indicate the addition of around 1.3MMb/d to this number in the next decade. By 2030, Petrobras is estimated to produce 3.5MMb/d.

The tenders that concluded this month in Brazil resulted in a great disappointment due to the lack of interest from global oil companies. However, it brought positive results for Petrobras, which practically obtained total control of more than 8MMboe in the Búzios field, where Petrobras obtained a 90 percent stake hold, while 10 percent was distributed equally among Chinese oil companies, CNOOC and CNODC.

       EIB Shies Away from Fossil Fuels

Since 2013, EIB has funded fossil fuel projects with US$14 billion. Last year, it funded US$2 billion. However, the EU is planning to stop funding oil, gas and coal projects by the end of 2021. Under the new policy, energy projects applying for EIB funding will need to show they can produce 1kWh of energy while emitting less than 250g of CO2, which excludes traditional gas-burning power plants.

Gas projects are being considered. However, they would have to be based on new technologies, such as carbon capture and storage, combining heat and power generation or mixing in renewable gases with fossil natural gas.

        Oil Demand Increase in 4Q19.

According to the IEA, global oil demand in 3Q19 increased by US$1.1MMb/d year-on-year, which is the fastest pace in the year and more than doubles the 435Mb/d seen in 2Q19. China’s demand increased by 640Mb/d year-on-year in 3Q19, which makes the country the biggest contributor to global growth.

Global oil demand is expected to accelerate to 1.9MMb/d in 4Q19, in contrast with a weak 4Q18 demand and lower prices.