If current trends continue, Mexico could become a net oil importer in a decade, a new report claims. Mexico, the world's sixth-biggest crude oil producer and an important supplier to the US, has seen its production fall by more than 25% from its 2004 peak of 3.9 million b/d to just under 3 million b/d in 2010, according to the study, The Future of Oil in Mexico, compiled by researchers from Rice University's Baker Institute and Oxford University.
Meanwhile, domestic demand has climbed from about 500,000b/d in 1971 to 2.15 million b/d in 2010, and could reach 2.33 million b/d by 2015. ‘This rate of growth, when juxstaposed against Mexico's ongoing reserve replacement rates, would imply that Mexico could rapidly become a net importer of oil, providing the country with little energy security,' the report says. ‘On the other hand, if Pemex can increase the rate of reserve replacement in relation to its overall resource base to something like what is seen in the US Gulf of Mexico, the export crisis could be averted for another 30 years.'
The study, a compilation of 14 separate academic papers by scholars from several international institutions, indicates that Mexican NOC Pemex will need to ‘fully develop its oil in line with international standards and technology' in order for Mexico to reap $1055 per capita per year by 2020 ‘versus $546 if current trends continue'.
Pemex has taken steps to slow the decline rate at the Cantarell field and increased investments in the offshore Ku-Maloob-Zaap and onshore Chicontepec fields. An enhanced oil recovery project helped boost Cantarell production to 2.1 million b/d in 2003, but production declined rapidly, falling to 770,000b/d in 2009 and expected to stabilize at around 400,000b/d. Investment in Ku-Maloob-Zaap has helped boost production to around 864,000b/d in 2009, but not enough to offset the decline at Cantarell. Pemex has had little success so far in the deepwater Gulf of Mexico; the company has pledged billions to deepwater prospects, but new production areas ‘will take a minimum of three to five years' to come onstream ‘even with the most optimistic assumptions', the report says.
Oil sector reforms in 2008 gave Pemex more managerial room to maneuver, but ‘the constraints facing Pemex are still disproportionate to the challenge of reconciling the goals for it', the study says. The reforms stopped short of allowing IOCs, which have the technological know-how to develop deepwater fields, from entering into production sharing agreements with Mexico.
Pemex will need to invest around $26 billion per year through 2019 to maintain or increase production, according to Carlos Elizondo Mayer-Serra, a professor of political science at the Centro de Investigación y Docencia Ecónómicas. And while most observers agree that further reforms are necessary to make Pemex more efficient and to increase the company's technical capabilities, the report questions whether Mexico's elected leaders have the will and ability to confront the challenges. A sudden drop in oil revenues might force action; the more likely scenario, however, the report says, is a gradual decline in revenue and postponement of the looming export crisis.
‘Do not expect the possibility of any significant reform until a crisis is a distinct possibility, Pemex faces a major accident, or, in the context of declining production, the trade union picks a fight against a capable reform-minded leader,' Elizondo writes. ‘But no crisis, no matter how serious it is, will ensure reform.'
He continues: ‘It seems unlikely that the situation at Pemex will improve without competition in all relevant markets, including E&P. Only a breakthrough similar to the discovery of the Cantarell field could allow Pemex to continue within its current institutional framework.' OE
DEEPWATER DUTY: The semisubmersible Bicentenario arrived in the Veracruz, Mexico, port of Tuxpan in late May aboard Dockwise's Blue Marlin to begin a deepwater Gulf of Mexico drilling program for Pemex. The DP rig, under contract to Pemex for five years, is managed by a consortium of Mexico's Industrial Perforadora de Campeche (IPC) and Grupo R Exploración Marina, or Gremsa. Bicentenario, built by Daewoo and previously known as La Muralla III, is a sixth-generation GVA 7500 design with eight 3500kW thrusters and accommodations for 160. Pemex said the rig's first mission would be to drill the wildcat Talipau-1 well in 940m of water.
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