Mexican Oil Industry: Pemex’s Chance
September 28, 2017
Recent oil rounds have generated positive effects for the Mexican oil industry; the last rounds have resulted in drilling several wells in the country, equaling Pemex’s performance of the past few years.
According to the National Hydrocarbons Commission (CNH), the first three auctions (Round 1.1, 1.2 and 1.3) led to the drilling of 13 offshore exploration wells and 38 onshore development wells.
Winning companies in Rounds 1.4, 2.1, 2.2 and 2.3 committed to drill 53 exploratory wells (26 onshore and 17 offshore).
New players will drill 104 wells in total; 66 exploratory and 38 development wells, meaning that companies will match Pemex’s recent figures in a short time, since the NOC has drilled an average of 66 exploratory wells in the last three years.
The entity will also approve investment plans for the latest Rounds in the coming months.
Expected investments are up to US$2.3B for the initial stages, and in case of commercial success, these could exceed US$50B.
The commission highlighted that the sector has invested US$1.1B so far for the blocks of Rounds 1.1, 1.2 and 1.3, and the government expects investments of US$1.2B thanks to signed contracts in the last four auctions.
The CNH commented that there are 65 new companies, from 16 countries, and they are already carrying out exploration and production activities in the country.
The commission offered 93 blocks in total in the seven auctions made, obtaining a success rate of 67%.
Energy Reform results have exceeded the government’s expectations, but the pending issue is Pemex’s recovery.
China’s Offshore Oil Company - CNOOC (SHA: 600583) said that it is looking for partners to develop oil projects in the Gulf of Mexico through farm-outs, and it is one of 16 companies qualified to take part in the auction of three fields to develop in partnership with Pemex.
Bottom-Line: Farm-outs are Pemex strategy to face its difficult situation. Is CNOOC sending a message? Will Pemex do something?
The knowledge and financial muscle of the Chinese company could benefit the NOC.
Oil companies continue to show their interest in the country and Pemex should announce more farm-outs to seize this positive environment.