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Despite the destruction of global oil demand and historically low oil price, Mexico’s Pemex plans to maintain its current rate of production, Reuters reported, citing a statement by the company to Mexico’s stock exchange.
Pemex also said in the statement that it had oil in storage to satisfy domestic demand despite a continuous fall in production that the company has been battling for a few years now.
The decision to maintain production is somewhat of a surprise. Earlier this month, the Financial Times reported that Mexico’s government was mulling over a production cut because of the steep international oil price drop that sent Mexico’s basket to around $10 a barrel.
“The price of the Mexican [oil export] mix is determined by international oil prices. All producing countries in the latest Opec-Non-Opec meeting expressed our willingness to adjust by a percentage to avoid overproduction,” the Mexican Energy Secretary said in a tweet in mid-March.
Last year, Pemex’s average daily production rate was 1.68 million barrels of crude. This production level was about 7 percent lower than the 2018 average and less than half its production rate from 2004, Reuters reported at the time.
The previous government tried to reverse the decline by liberalizing the country’s energy industry and inviting foreign companies to bid for Mexican oil fields. The results of this opening up have yet to be seen, although there has been successful exploration offshore.
However, as the government changed, the new administration changed the approach and bet on greater state participation in the energy industry, with president Andres Manuel Lopez Obrador pledging a substantial increase in production by the end of his term in office, to 2.5 million bpd. Between 2019 and 2020, Pemex had planned a production increase of 300,000 bpd.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.