Mexico has seen decreases in its oil production in the past two decades, but now the country is looking to reverse this trend by reinvesting in Pemex. Meanwhile, private companies are growing their share of production and continue to increase their significance in the country’s oil and gas sector.
BREAKING THE CEILING: Although a number of the setbacks that the Mexican oil industry has faced are out of its control, the AMLO government’s reversal of the economic policies of the previous government has made it more difficult for foreign companies to operate in Mexico. Experts estimate that Mexico could be producing 2.9 million bopd if the previous government’s energy reforms were fully implemented. This reversal in policy comes despite the fact that the private sector is increasing its contribution to the country’s output.
While Pemex continues to focus on maturing fields, the private sector is galloping ahead. Many of the E&P contracts awarded during past bid rounds are now passing from the exploration phase to the development phase. Moreover, in May 2022, private operators managed to break the 100,000-bopd ceiling, a production equivalent to 6% of national output.
“The fact that private E&P companies have hit 100,000 bopd is a huge milestone,” Merlin Cochran, director-general of Amexhi, told The Energy Year. “It exemplifies the commitments of the private sector and signifies change.”
This historical goal was jointly achieved by 21 private firms operating 32 of the 110 contracts in the country. Forecasts suggest that production from the private sector will reach 280,000 bopd by 2024 and peak at 400,000 bopd in 2028. Reflecting on the current scenario, Alberto de la Fuente, president and general director of Shell Mexico, told The Energy Year that “what people are looking for is to accelerate production, and in this journey, private operators are also excelling.”
Players such as Eni, Hokchi Energy and Perenco are the largest private producers in-country. Together they have managed to raise their output to 50,000 bopd, around half of the total private production.
Eni’s Area 1 recovered from stagnated output with the arrival of its Miamte FPSO unit in January 2022, which led to production jumping from 9,336 bopd to 14,091 bopd. Likewise, Hokchi’s Area 2 has experienced a ramp-up in production since March 2021, rocketing its oil flows from 1,832 bopd to 20,013 bopd. Perenco’s Santuario El Golpe asset in Tabasco has also seen a steady output and is now producing close to 16,500 bopd.
Another promising area, Area 4, was recently owned by Texas-based Fieldwood Energy but was recently sold to Lukoil, which operates it with partner PetroBal. Production in Area 4 began in November 2021, with 22,212 bopd being pumped from the Ichalkil and Pokoch fields in Q1 2022. Production from the fields is set to hit 40,000 bopd by the end of 2022. Overall, Area 4 is expected to reach its bopd peak in 2023 at 60,000 bopd.
Thus, production rates coming from the private sector are rising rapidly. While many of the E&P contracts are now entering a development phase, private operators are bound to gain more prominence in Mexico’s oil spectrum moving forward. According to Jorge de Dios Morales, director-general of Diarqco Group, of the 111 contracts awarded post-2013 energy reform, at least 20-25% have reached development.
“This translates into greater investments, higher job creation rates and, consequently, greater benefit sharing for the government,” he told The Energy Year. This situation marks a win-win for Mexico’s oil industry at large.
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