Natural gas production in Mexico was flat year/year at 3.9 Bcf/d in October, according to upstream hydrocarbons regulator Comisión Nacional de Hidrocarburos (CNH).

Mexico October prodduction

State oil company Petróleos Mexicanos (Pemex) accounted for 3.68 Bcf/d of the total, the same amount it produced in the year-ago month.

Dry gas production from Pemex processing centers averaged 2.18 Bcf/d, down from 2.3 Bcf/d in October 2019, according to company data.

The dry gas figure is a more precise reflection of the volumes that make it to the local market, as the figure does not include liquids, water and other impurities, nor the gas that Pemex re-injects into oil wells to increase pressure and stimulate production.

Pemex production of fractionated natural gas liquids (NGLs), meanwhile, totaled 188,000 b/d, down from 220,000 b/d.

Private sector operators, for their part, produced 218.2 MMcf/d in October, down from 227 MMcf/d in the year-ago month, CNH data show.

Pemex has struggled to maintain oil and associated natural gas output in recent years, due in part to budgetary constraints and the natural decline of legacy shallow water fields such as Cantarell and Ku-Maloob-Zaap.

Although basins such as the Burgos, Tampico-Misantla and Veracruz hold immense prospective non-associated gas resources, Pemex has historically dedicated most of its upstream capital budget to oil-directed drilling, a trend that has continued under current president Andrés Manuel López Obrador.

“There is absolutely nothing on the table…this government is not doing anything to increase domestic production of gas,” energy analyst Rosaney Barrios told NGI’s Mexico GPI in a recent interview.

As a result, Mexico has increasingly relied on pipeline gas imports from the United States.

Genscape Inc. natural gas analyst Ricardo Falcón told NGI’s Mexico GPI on Monday that pipeline gas flows from the United States to Mexico were averaging close to 5.5 Bcf/d month-to-date in November, up slightly over 3% from November 2019.

Flows to Mexico from West Texas were nearing 823 MMcf/d, Falcón said, nearly 40% higher y/y.

The difference “is primarily associated with activity at the Wahalajara system, both via direct imports from the U.S. and through receipts from other Mexican pipelines with access to Permian gas molecules,” he said.

Due to Mexico’s dependence on U.S. gas, transactions in Mexico are typically linked to liquid U.S. trading locations such as Henry Hub, Waha or Houston Ship Channel.

Natural gas prices in Mexico averaged $3.10/MMBtu in October, versus $3.16/MMBtu in October 2019, according to the latest IPGN monthly natural gas price index published by the Comisión Reguladora de Energía (CRE).

CRE used 262 transactions reported by 27 marketers for a total volume of 6.88 Bcf/d to calculate the October index, versus 273 transactions from 25 marketers for 7.59 Bcf/d a year ago.

Crude Crunch

National crude oil production averaged 1.63 million b/d, down from 1.66 million b/d in October 2019.

Pemex oil production was 1.57 million b/d, down from 1.62 million b/d. Private sector-operated production was 55,110 b/d, up from 45,199 b/d.

Pemex reported crude oil exports of 908,000 b/d for October, their lowest level since 1980 according to local media.

[Want to know how much natural gas is being imported into Mexico? Check out NGI’s Mexico Natural Gas Flow Tracker.]

Although President Andrés Manuel López Obrador has suspended bid rounds and farm-out tenders for stakes in Pemex-operated blocks, the secondary market for oil and gas acreage in Mexico remains active.

November saw China Offshore Oil Corporation E&P Mexico (CNOOC Mexico) and Shell Exploración y Extracción México (Shell Mexico) sign a farm-in agreement whereby Shell will farm into a 30% working interest in the offshore Block L04-A4 in the Perdido Fold Belt region of the Gulf of Mexico.

Under the agreement, which is pending regulatory approval, CNOOC Mexico will retain a 40% working interest and operatorship of the block, according to Mexico’s oil and gas association Amexhi.