Mexican national oil company Petróleos Mexicanos (Pemex) is behind schedule at the 20 fields it deemed last year as “high priority” and crucial to reversing years of decline in hydrocarbons production, according to upstream regulator Comisión Nacional de Hidrocarburos (CNH).
So far, 17 of the 20 fields have received development approval, but plans at those fields have experienced “deviations,” according to the CNH, principally due to a lack of supporting infrastructure including drilling platforms and pipelines.
Of those fields, which have been deemed a quick and simple solution to boosting production by the government, only four – shallow water fields Chocol, Cibix y Xikin, and the onshore Ixachi field in Veracruz – were producing new oil and gas at the end of 2019.
Production at the priority fields was a little over 6,000 b/d of crude and 35 MMcf/d of gas, compared to production goals of 15,400 b/d and 52 MMcf/d for 2019. Of the 29 wells planned to be completed, only three at end-2019 met that definition, CNH said.
“I think it is another piece of evidence of the difficulties, hurdles and challenges of exploration and production in Mexico,” energy consultant Gonzalo Monroy told NGI’s Mexico GPI. “The poor results are due to falling behind schedule in development of key infrastructure. Bringing companies with little to no experience to such accelerated development contributed to the shortfall.”
Analysts have said that oilfield services contracts handed out to local firms for the priority fields were through a rushed, opaque, invitation-only process, and were poorly designed. Many suggest that Mexico will be hard-pressed to get anywhere near its production goals without restarting cancelled oil rounds and farmouts.
Last week however, Energy Minister Rocío Nahle, who has previously wavered on the topic, stated firmly that there would be no such new rounds.
The current government has set respective crude oil and natural gas production targets of 2.6 million b/d and 4.91 Bcf/d for Pemex by the end of president Andrés Manuel López Obrador’s term in 2024.
Natural gas production in Mexico averaged 3.81 Bcf/d during 2019, up from 3.71 Bcf/d in 2018, while crude output fell to 1.68 million b/d on the year from 1.81 million b/d, a decline of 131,000 b/d, or 7.2%. For December 2019, natural gas output at fields operated by Pemex averaged 3.69 Bcf/d, up from 3.52 Bcf/d in December 2018.
Overall, $16 billion has been earmarked for the priority fields over the span of their development.
By far the biggest of the priority fields, especially as it pertains to natural gas, is Ixachi. Pemex last year obtained approval from the CNH for a $6.4 billion development plan at the field. Pemex plans to drill 47 wells at Ixachi, where natural gas output is expected to peak in 2022 at 638.5 MMcf/d.
But Ixachi is indicative of the larger problem facing the fields, analysts have said. For example, Pemex’s plan of drilling 24 wells in 2020 at Ixachi is “impossible,” Welligence’s Pablo Medina, vice-president of research, told NGI’s Mexico GPI recently.
“We believe they’re going to drill at most 10 wells next year,” Medina said.
Due to Ixachi’s technical complexity, Pemex will be hard-pressed to assemble enough drilling crews with the requisite experience to carry out the work plan in such short order, Medina said.
As a result of falling domestic production, CNH said last year it sees Mexican imports of natural gas from the United States increasing at least 25% by 2024.
Today, one-half of domestic natural production is used by Pemex for its operations and for pressure at fields. At least 81% of local demand is forecast to be imported by 2024.