Mexico Oil Production Drops in Almost All Contracts and Allocations During July

RIO DE JANEIRO, BRAZIL – In July, Mexican domestic oil production reached 1.604 million barrels per day, with a reduction of 4.2 percent in one year and a monthly drop of 0.7 percent, and for the first time since the beginning of private operations in the country, all but one of the fields reporting to the regulator showed monthly drops, said the National Hydrocarbons Commission (CNH) on Tuesday, September 1st.

Again, and without the cuts made during May and June as a result of commitments with producers and non-affiliates of the Organization of Petroleum Exporting Countries (OPEC+), the largest drop in production was observed in the allocations of Petróleos Mexicanos (PEMEX), where extraction stood at 1.478 million barrels per day, with an annual reduction of seven percent and 0.6 percent compared to June. By the seventh month of 2020, the share of the state company’s allocations dropped to 92.14 percent of the national total.

The only area where PEMEX operates without any contract partners, in the Ek and Balam shallow water fields, showed a reduction of 0.5 percent per month in its July production, which stood at 69,318 barrels per day, with an annual increase of 50 percent. This contract now represents 4.3 percent of the national oil production.

When including all contracts in which PEMEX holds a share with or without partners and its allocations, the national oil company’s extraction totaled 1,547 million barrels per day, with the same 0.6 percent reduction in its allocations and a 5.4 percent annual drop. As a result, the company accounts for 96.5 percent of the national oil extraction.

Contracts

Oil production of all contracts, including the PEMEX contract in Ek-Balam, showed a monthly reduction of 1.7 percent to 126,062 barrels per day in the seventh month of the year. In the annual comparison, mainly as a result of the activity started a year ago by the Italian Ente Nazionale Idrocarburi (ENI) in the Miztón-Tecoalli shallow water contract, contract production increased by 47.8 percent compared to July last year.

Consequently, as of July, production through oil contracts granted as of the 2014 reform accounted for 7.86 percent of national production, when a year ago it stood at five percent and at 2.8 percent in 2018.

Oil extraction through association contracts in onshore areas with the PEMEX awarded by the CNH through farmout type bids amounted to 12,600 barrels per day, with a reduction of 1.6 percent per month, but with an increase of 24 percent in one year.

Both Cárdenas-Mora, operated by the Egyptian company Cheiron, and Ogarrio, from the German company Dea Deutsche, had individual monthly drops of 2.8 and 0.7 percent respectively, although in the annual comparison both contracts increased their production by 18 and 29 percent each. The extraction by means of farmouts is only 0.8 percent of the national total.

Regarding the three also onshore blocks contracts operated by private companies in association with PEMEX that migrated from the previous regime following the energy reform, extraction in the month of July stood at 21,167 barrels per day, with a reduction of 1.6 percent compared to June, in addition to an annual increase of 13 percent.

The Miquetla contract, from the consortium between Diavaz and Weatherford, saw a 4.9 percent drop in one month, while Ebony, also operated by Mexico’s Diavaz, saw a slight monthly increase of one percent and Santuario-El Golpe, operated by Britain’s Petrofac, posted a 2.2 percent drop in production.

Even the shallow water contract in the Miztón field, operated by ENI, experienced a monthly drop of 3.7 percent, reaching 18,005 barrels per day in July after one year of operation, its extraction has increased by 232 percent in this area where it shares a heavy royalty of over 81 percent of its revenue with the Mexican State, which awarded it with proven reserves already found by offering the best conditions for its operation in Round 1.2.

Finally, the nine contracts awarded through Rounds which already have production, seven of which correspond to Rounds 1.3 and 2.3 of onshore fields, had a cumulative production of 22,934 barrels per day in July, an increase of 126 percent in one year, but with a monthly reduction of 5.5 percent.

It should be noted that the Hokchi shallow water block, granted in Round 1.2 to the consortium between the Argentine Panamerican and E&P Hydrocarbons that bears the name of the block, reported production for the third consecutive month, reaching 1,559 barrels per day in July, with a monthly reduction of 21 percent.

Source: El Economista