Mexico must begin oil production in deep waters and its onshore Chicontepec field, as well as revive abandoned wells, in order to stop a decline in production that has cost the company $10 billion in lost revenue since 2005, according to a government study released today.
Production in waters deeper than 500 meters (1,640 feet), where state-owned Petroleos Mexicanos, or Pemex, estimates there are 30 billion barrels of reserves, will help raise daily output by 500,000 barrels by 2021, the study said.
“To arrest the decline in production, we need to act on various fronts,” Energy Minister Georgina Kessel said at a news conference today. “Every day we wait to act, Mexico loses revenue.”
The study, ordered by President Felipe Calderon, has been presented to most political parties, Kessel said. The government will submit a bill to reform the industry, which may include allowing foreign or private companies to help explore in deep waters, when most lawmakers have agreed on its basic tenets.
Calderon has faced opposition from lawmakers who say he wants to privatize the state oil industry. Kessel and Pemex Chief Executive Officer Jesus Reyes Heroles declined to say where Pemex would get the money for the projects they proposed.
A separate government report obtained by Bloomberg News says energy reforms would boost Mexico’s economy by 1 percent annually.
Mexico began to explore in waters deeper than 500 meters too late, said Reyes Heroles. Production from Chicontepec, abandoned onshore wells and fields that are peaking will raise oil output by 1.32 million barrels a day, the report said.
Only one of the six wells Mexico has drilled in water deeper than 500 meters has enough reserves to be economically viable to begin production.
Pemex’s crude output has fallen by 13 percent since peaking in 2003 and reserves have fallen 57 percent to 14.7 billion barrels since 1998, the first year Pemex published reserves.
The study also evaluated Mexico’s refining industry. The company needs to upgrade three of its gasoline refineries and build a new one every three years during the next 20 years to avoid a tripling of imports of the fuel to 1.6 million barrels a day, the report said. Mexico currently imports 40 percent of its domestic gasoline demand.
Pemex has forecast crude output of 3 million to 3.1 million barrels a day in 2008. Mexico’s oil output may fall by 800,000 barrels a day by 2012, Kessel said today. It may fall by 1.8 million barrels a day by 2021, she said at the news conference.
Source: Bloomberg