Despite vowing to stick to production goals, Mexico’s Petróleos Mexicanos (Pemex) produced significantly less oil and gas than it had planned at its so-called “priority fields” in the first quarter, according to new information made available by hydrocarbons regulator Comisión Nacional de Hidrocarburos (CNH).

Last year, Pemex had said it would give priority to 20 fields as part of its strategy to boost oil and gas production in Mexico, where output has declined annually for more than a decade.

As part of this push, CNH approved more than $16 billion for hydrocarbon development plans in 17 Pemex fields. Through the drilling of 119 new wells, the fields were estimated to increase national oil production by 307,000 b/d and gas production by 893 MMcf/d by 2022.

Since CNH gave a green light to Pemex for the exploration and production of the Suuk field back in October, the 17th priority area approved for development, Pemex has yet to submit plans for the remaining three fields.

In the first quarter, the 17 fields combined saw production of 22,000 b/d and 64.9 MMcf/d. Oil production was only 12% of its stated target for the period, and gas production 15%, according to CNH.

In 2019, production at the priority fields was a little over 6,000 b/d of crude and 35 MMcf/d of gas.

Commissioner Alma América Porres said on Thursday during a virtual session of the CNH that the production results demonstrated that the fields had not been “well evaluated.”

Among the fields is the onshore Ixachi field in Veracruz state, where Pemex has pinned its hopes for new gas production.

The plan for Ixachi entails drilling 47 wells, with production expected to peak in 2022 at 638.5 MMcf/d natural gas and 82,500 b/d condensate. Of these wells, 24 are slated to be drilled by the end of this year, requiring about $800 million of investment.

But in the first quarter, Ixachi produced just 44.4 MMcf/d, essentially flat to 4Q2019.

Analysts have said that Ixachi is indicative of a larger problem facing the fields, where technical complexity and the lack of drilling crews with the requisite experience make carrying out the work in a short amount of time difficult.

Industry participants recently have suggested that if natural gas prices were to rise – and many analysts expect they will given current market conditions – then the shift of focus for natural gas should pivot to northern Mexico and in particular the Burgos Basin, which is the country’s largest producing basin of non-associated gas.

Based on his analysis, former CNH president Juan Carlos Zepeda told NGI’s Mexico GPI that he thinks “Mexico could see prices around $3.40 by early next year.

“At that price, Mexico could reactivate or relaunch development in the Burgos Basin together with other conventional non-associated gas basins in Mexico, such as Veracruz and Sabinas-Burros-Picacho in the north of Mexico.”

Mexico President Andrés Manuel López Obrador canceled CNH bid rounds 3.2 and 3.3, which would have made available conventional and unconventional gas blocks in the Burgos.

“My recommendation is that Mexico prepare for this [price rise] and to consider non-associated natural gas development again,” Zepeda said.

Mexico’s Jaguar Exploración y Producción CEO Warren Levy echoed his comments at the Institute of the Americas’ La Jolla Conference in mid-May. He said executives at his exploration and production (E&P) firm see “significant upside” for natural gas in Mexico, with prices set to benefit as a result of the ongoing crisis.

“We see real potential for natural gas to flourish in Mexico in the next 12-18 months,” Levy said. “We think there is still potential to attract capital.”

Jaguar is one the largest private E&Ps in Mexico in terms of permits, and secured 11 of the 24 gas-rich blocks on offer through the Round 2.2 and Round 2.3 bidding process conducted by CNH in 2017.

“We haven’t seen a lot of attention to natural gas,” Levy said, but “the reality is it is very inefficient for Mexico,” given that the country imports around 70% of its gas needs. The amount of associated gas Mexico flares off “is an atrocity,” he added.

Levy highlighted, in particular, the Burgos Basin, just south of the U.S. border. “There is a huge amount of potential, and it’s been under drilled.” The play makes sense for U.S. E&Ps, he said, because “you don’t have to put any equipment on a boat.”