Pemex will focus on shallow-water projects and onshore plays and avoid investing in its deepwater riches for now, as the ailing Mexican state-run oil company seeks to turn around a 14-year slide in crude production, a top official said on June 20.
CFO Alberto Velazquez outlined the approach Pemex will take at a conference in the colonial city of Leon. He emphasized that Pemex has no plans to invest in costly and technologically complex deepwater projects in the Gulf of Mexico (GoM) but will instead focus its E&P budget on the country’s shallow-water and onshore potential.
“We are not going to invest in those types of developments,” said Velazquez, referring to deepwater projects.
The vast majority of Pemex’s current production comes from shallow-water areas clustered around the southern rim of the GoM, off the coast of the states of Veracruz, Campeche and Tabasco.
While the company has drilled wells and made discoveries in Mexican territorial waters in the deepwater GoM and has a joint venture partnership in one such project with Australia’s BHP Billiton, it has yet to produce any oil or gas there.
Pemex’s current crude production averages just under 1.7 million barrels per day (MMbbl/d), down nearly a half from peak output of about 3.4 MMbbl/d in 2004.
Mexican President Andres Manuel Lopez Obrador has pledged to raise Pemex output to 2.5 MMbbl/d by the end of his term in 2024.
Velazquez expressed confidence that the company’s near-term focus will prove successful.
“The most important thing is we’re convinced of what we’re doing,” he said.
Pemex, the world’s most indebted oil company, has faced mounting pressure to improve its finances and invest more in its profitable exploration and production business.
Earlier this month, Fitch Ratings downgraded Pemex’s roughly $80 billion of bonds to speculative grade—or “junk” status. A second downgrade from another ratings agency would trigger forced selling from funds whose mandates prohibit them from holding such assets.
Among many fixed-income investors, Pemex debt is already trading like a junk asset.
Velazquez added that Pemex’s expects to invest between US$13.2 billion and $13.7 billion (250 billion-260 billion pesos) annually in exploration and production over the next few years.
Pemex’s E&P budget this year is abut $14.2 billion.
Recommended Reading
ConocoPhillips EVP of Strategy, Sustainability, Technology Macklon to Retire
2024-02-16 - Dominic Macklon, who began his career with Conoco in 1991, is set to retire ConocoPhillips May 1.
Baker Hughes Awarded Saudi Pipeline Technology Contract
2024-04-23 - Baker Hughes will supply centrifugal compressors for Saudi Arabia’s new pipeline system, which aims to increase gas distribution across the kingdom and reduce carbon emissions
Bobby Tudor on Capital Access and Oil, Gas Participation in the Energy Transition
2024-04-05 - Bobby Tudor, the founder and CEO of Artemis Energy Partners, says while public companies are generating cash, private equity firms in the upstream business are facing more difficulties raising new funds, in this Hart Energy Exclusive interview.
Diamondback Announces Executive Leadership Promotions
2024-02-21 - Diamondback Energy’s leadership changes follow the company’s previously announced $26 billion merger with Endeavor Energy.
President: Financial Debt for Mexico's Pemex Totaled $106.8B End of 2023
2024-02-21 - President Andres Manuel Lopez Obrador revealed the debt data in a chart from a presentation on Pemex at a government press conference.