Mexican crude oil output may only return to 2012 levels in 2018
Mexico may succeed in bringing oil production only back to where it was three years ago by the time the current administration ends in 2018 despite a major reform to open up the industry, a senior government official said on Wednesday.
In December 2012, the month President Enrique Pena Nieto took office, Mexican crude output was 2.56 million barrels per day (bpd), well down from peak production of nearly 3.4 million bpd in 2004. By this August, it had fallen to 2.25 million bpd.
Deputy Energy Minister Lourdes Melgar said that with output declining at aging fields and international crude prices down sharply since last year, it would take time for new projects to make up the shortfall.
"The situation has obliged us to make adjustments," she said in an interview. "Just now, the most important thing is to arrest the decline in output and get back" to the 2.5 million bpd.
Asked whether that figure was the best Mexico could hope for by 2018, Melgar said, "At this point in time to 2018, taking into account the time it takes to produce, yes."
That would be well below the target of 3 million bpd the government first set itself when Pena Nieto launched an overhaul of the oil and gas industry, which from last year opened up crude production and exploration to private companies.
Mexican output levels have also fallen because state oil company Pemex last year revised down its total crude production by more than 100,000 bpd, citing water and other impurities that had previously been included in reported volumes.
In view of the headwinds, Mexico could not help any producers that may be looking to cut output to prop up prices, though it is ready to take part in a technical meeting called by OPEC this month to discuss the market, Melgar said.
Asked on the outlook for the price of oil in the next two years, Melgar was not optimistic it would rise much. "We're talking about a range of $40, $50 per barrel. We're definitely not seeing prices of $80, and $60 looks difficult," she said.
Mexico last week held the second series of the so-called Round One auctions of oil and gas fields, and a third phase of 25 onshore tenders is due to take place in December.
Terms for the fourth phase, which will feature deep water fields, would likely be announced by early November, with the auctions taking place some six to nine months later at a time that did not clash with auctions also scheduled to be held in the United States, Melgar said.
That phase would comprise around 10 blocks for deep waters and one or two contracts for heavy crude areas, she said.
Several of the deep water blocks up for grabs would straddle the U.S.-Mexican maritime border along what is known as the Perdido Fold Belt, while others would be in the Salina basin off the Gulf state of Veracruz. A planned fifth phase could end up being a mix of conventional and non-conventional areas, she added.