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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Mexico’s Oil Crisis Deepens

Mexico’s state oil company Pemex said it produced an average 1.76 million bpd of crude in October, down 7 percent from October last year, Reuters reports, citing data released by the company. This is also one of the lowest monthly production rates since 1990 when records began.

The decline was attributed to the natural depletion of mature fields, highlighting the urgent need for new production in the country. The outgoing government of Enrique Pena Nieto launched a sweeping reform in Mexico’s energy sector, one of its aims being to open up the local oil wealth to foreign operators in order to stem this decline in production. The incoming government is currently reviewing oil contracts signed by the previous administration to make sure no corruption was involved in the deals.

Exports of crude also declined last month, and by a lot more than production. Pemex exported an average 1.03 million bpd, down by 25 percent from a year earlier. President-elect Andres Manuel Lopez Obrador earlier this year said Pemex should keep more crude for its refineries instead of exporting it to reduce Mexico’s dependency on imported fuels, but the country’s refining sector needs a lot of work to make this plan successful.

It was in October that Pemex’s refineries hit a record low utilization rate of 25.7 percent, according to an S&P Global Platts report, which also noted the causes of the drop included shortages of light crude and technical difficulties at some refineries. Pemex would need to upgrade its refineries to produce more gasoline to make local refining more profitable as currently its facilities produce a lot more fuel oil than would make economic sense.

Despite the problems, Obrador has ambitious plans, including an increase in crude oil production to 2.6 million bpd by the end of his six-year term in office and a lot more domestic refining.

By Irina Slav for Oilprice.com

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Leave a comment
  • Jeffrey J. Brown on November 27 2018 said:
    Mexico is actually on the verge of becoming a net oil importer, and it is a classic case history of what I call “Net Export Math.”

    Their total petroleum liquids production in 2004 was 3.8 million bpd, versus total liquids consumption of 2.0 million bpd, resulting in 2004 (total petroleum liquids) net exports of 1.8 million bpd (BP data).

    Production in 2017 was down to 2.2 million bpd, versus consumption of 1.9 million, resulting in 2017 net exports of 0.3 million bpd.

    Note that given an ongoing production decline in a net oil exporting country, unless they cut their domestic liquids consumption at the same rate as, or at a faster rate than the rate of decline in production, it’s a mathematical certainty that their net export rate of decline will exceed their rate of decline in production and that their net export rate of decline will accelerate with time.

    Mexico’s 2004 to 2017 rate of decline in production was 4.2%/year, versus a net export rate of decline of 17%/year.

    Year to date production through October, 2018 was 2.1 million bpd. Assuming no change in consumption, their 2018 net exports would be down to 0.2 million bpd. Note that this would be a simple percentage year over year decline in net exports of 33%, versus a production decline of only 4.5%.

    At the current rate of decline in their ratio of production to consumption, Mexico will probably hit zero net oil exports in 2020.
  • NickSJ on November 27 2018 said:
    Typical performance by a government run producer. Performance won't be any better and probably worse at the end of Obrador's term. Mexico is following the Venezuelan model, and will get similar results.

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