Mexico’s state giant Petróleos Mexicanos (Pemex) saw domestic sales of natural gas decrease by 10.9% year/year in 2021, the firm said in its recently released 20-F annual report to the U.S. Securities and Exchange Commission.

Pemex

Sales dropped from 1.313 Bcf/d in 2020 to 1.170 Bcf/d last year, Pemex said. This decrease “was mainly because private companies have the option to purchase natural gas from other marketers,” according to the filing, which was for full-year 2021.

“To reverse the loss of the natural gas market, for the July 2021-June 2022 cycle, a commercial strategy was designed based on maintaining competitive prices in the domestic market to recover customers that once belonged to Pemex,” the company said.

Pemex also upped its imports of natural gas from the United States last year “to satisfy shortfalls in our production and to meet demand in areas of northern Mexico that, due to their distance from the fields, can be supplied more efficiently by importing natural gas from the United States.”

In 2021, given the higher price environment, the value of natural gas imports by Pemex increased by a whopping 183.7%, according to the filing.

Last year, Pemex imported 904 MMcf/d from the United States, up 6% year/year. Pemex also cited the need for more imported gas due to “the lower availability of direct gas from Pemex Exploration and Production fields and the reduction in dry gas production from cryogenic units.”

Given last year’s import volume from the United States, this would mean that Pemex accounts for around 15% of the country’s total natural gas imports.

In its latest earnings release, Pemex reported first quarter gas production of 3.821 Bcf/d, up 3.3% year/year.

Total Pemex natural gas production, however, decreased by 1.9% from 2020 to 2021, according to the filing. The company cited lower volumes from its legacy projects, including Cantarell, Ku-Maloob-Zaap (KMZ), and Burgos.

Although in steady decline, the offshore KMZ field remained Pemex’s star asset last year. The KMZ business unit produced 718,000 b/d in 2021, or 41.1% of total crude oil production for the year. KMZ also produced 835 MMcf/d of natural gas, or 17.9 % of total natural gas production last year. This figure includes nitrogen production.

At KMZ, the company saw realized natural gas prices of $4.74/Mcf last year, compared to $2.92/Mcf a year earlier.

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The offshore marine region, which includes KMZ, saw overall natural gas production decline year/year. In 2021, the marine region produced 2.848 Bcf/d, or 61% of Pemex natural gas production, a decrease of 5.8 % year/year.

Natural gas production associated with crude oil production accounted for 78.2% of total Pemex natural gas production in 2021. As of December 31, 2021, 151 of Pemex’s 323 gas producing fields, or 46.7%, produced non-associated gas, according to the filing.

The Burgos project in northeastern Mexico was the largest producer of non-associated gas. Burgos accounted for 9.5% of natural gas production in 2021, or 444.5 MMcf/d. In 2021, 10 new wells were completed at Burgos, bringing total completed wells drilled to 8,014, of which 2,352 were in production.

In the filing, Pemex called the flaring of gas “the most significant atmospheric emission from offshore oil and gas facilities.” In 2021, 12.1% of total Pemex natural gas production was flared, compared to 10.8% of total natural gas production in 2020. 

The increase in gas flaring in 2021 was primarily due to the fire at the E-Ku-A2 platform, the filing said, “causing damage to the compression equipment resulting in a decrease in handling capacity of natural gas.” The company also cited the lack of transport infrastructure at the Quesqui and Ixachi fields.

Late last year, Pemex “implemented certain actions intended to significantly reduce gas flaring, including the restoration of damaged compression equipment from the E-Ku-A2 event, and the incorporation of new Quesqui field infrastructure,” according to the filing.