Background on Petróleos Mexicanos (Pemex)
Petróleos Mexicanos, commonly known as Pemex, is the state-owned petroleum company of Mexico. Established in 1938, Pemex is responsible for the exploration, production, refining, and marketing of petroleum and petrochemical products in Mexico. As the country’s primary energy company, Pemex plays a crucial role in Mexico’s economy and energy security.
Pemex’s Plan for Well Reactivation
In an effort to boost crude oil production, Pemex has initiated a process of bidding for the reopening of currently closed wells through private contractors. The goal is to have these reactivated wells produce 13,000 barrels per day by December 2025. This initiative aims to increase the profitability of Pemex’s assignments and ensure compliance with national production targets, projected at 1.8 million barrels per day, while the current output stands at 1.6 million barrels (including crude and condensates).
Project Details
- Focus: Production-oriented project
- Private contractors will handle investment, engineering, procurement, well intervention, operation, and maintenance of production
- Current stage: Reviewing technical information on wells and integrating project data
- Estimated timeline for base analysis and allocation award: Mid-May to late September 2023
Recent Production and Drilling Challenges
During the first quarter of 2023, Pemex completed drilling for 12 development wells and five exploratory ones, totaling 17. This is the lowest number of wells drilled for any comparable period since 1995, when Pemex also completed 17 wells.
Comparison with Previous Periods
- 17 wells drilled in Q1 2023 is less than half of the 41 wells drilled in Q1 2022
- This number is also less than one-third of the 68 wells completed during Q1 2020, which was the highest level reached in comparable periods during the previous administration
Impact of Reduced Drilling Activities
The decline in drilling activities coincides with Pemex’s struggles to settle overdue payments to suppliers and service providers, including drilling contractors. This situation has further strained Pemex’s operations.
Decrease in Oil Production
In Q1 2023, Pemex’s liquid hydrocarbon production (crude and condensates) dropped by 11.3%, resulting in a decrease of approximately 200,000 barrels per day. The daily output fell to one million 615,000 barrels, the lowest level reported by Pemex since 1979.
Key Questions and Answers
- What is Pemex’s plan for increasing oil production? Pemex aims to reopen 400 currently non-productive wells by December 2025 through private contractors, targeting a daily production of 13,000 barrels.
- Why is Pemex facing challenges in meeting production targets? Pemex has encountered difficulties in settling overdue payments to suppliers and service providers, including drilling contractors. Additionally, the company has experienced a decline in liquid hydrocarbon production due to natural field decline and delays in completing technically complex wells.
- How does the recent decrease in drilling activities affect Pemex? The reduction in drilling activities has exacerbated Pemex’s financial struggles, making it harder for the company to meet its production targets and maintain operational stability.
