BMI View: Mexico's historic energy sector liberalisation is ushering in a transformation of the country's hydrocarbons sector. Whilst it will b e a number of years before results are seen in the country's production and reserves data, over the long term t he reforms will bolster upstream activity and reverse a decade-long decline in production . Pemex ' s upstream activity will remain limited over the next two years in the wake of the industry downturn .
|e/f = BMI estimate/forecast. Source: Sener, BMI|
|Crude, NGPL & other liquids prod, 000b/d||2,788.6||2,591.5||2,431.6||2,321.3||2,374.4||2,459.3||2,526.4|
|Refined products production, 000b/d||1,155.1||1,064.5||1,011.3||1,001.2||1,031.2||1,072.5||1,088.5|
|Refined products consumption & ethanol, 000b/d||2,007.0||2,027.1||2,057.5||2,094.6||2,142.7||2,196.3||2,251.2|
|Dry natural gas production, bcm||45.8||42.4||39.0||38.1||38.6||39.8||41.0|
|Dry natural gas consumption, bcm||59.2||60.4||62.2||65.3||67.9||70.3||72.4|
Latest Updates And Key Forecasts
Mexican national oil company (NOC) Petroleos Mexicanos (Pemex) will remain under financial and operational strain in 2017. Whilst the strengthening of crude benchmark prices in H116 helped stabilise the company's losses, the price of Mexican crude remains at historic lows, deeming the majority of its upstream operations unprofitable.
Our forecast for continued price weakness will weigh on Mexico's oil & gas sector in 2017, limiting investment into existing projects by Pemex. We therefore maintain our downbeat expectation for total liquids production in 2017 at -4.5% y-o-y implying a further reduction of 160,000b/d for the year. This compares to a decline of 6.2% y-o-y in 2016 and extends Mexico's overall losses for a 13th consecutive year.
A key objective of the company's CEO, Jose Antonio Gonzalez Anaya, is that the NOC will accelerate efforts to clear its outstanding repayments and build investor confidence in the company as a viable contributor to future upstream developments. The farming out of deepwater assets, a new debt management strategy announced in September and a continued pullback in capex spending represents the start of a more concerted effort to set the company back on track.
In August, Mexico's National Hydrocarbons Commission (CNH) approved the license contract terms and bidding requirements for the second tender of the Round Two Licensing Round, signalling progress of the historic liberalisation process. The second package includes 12 onshore exploration and extraction blocks containing prospective resources of 643.2mn bbls of oil equivalent (boe). Resources are roughly split between nine blocks in the northern Burgos Basin and three blocks in the southeast of the country. The tender follows the recently announced opening of Round 2.1 in July which offered 15 shallow water blocks containing an estimated 1,586mn boe of prospective resources. Winners will be announced on March 22 2017.
In October, the country's first two non-Pemex operated wells were approved. Pan American Energy will commence drilling at its Hokchi-2 shallow water well followed by Eni-operated Amoca-2 on December 1. Both fields were awarded at the second licensing round of Round One in 2015.
On October 14, the CNH authorized Pemex to conduct its unconventional drilling campaign in Veracruz state. The five fields - Amatitlan, Pitepec, Soledad, Miahuapan and Miquetla - were awarded to Pemex as part of the Round Zero process in 2014 when the company was awarded assets it would develop on its own or via joint ventures. A largely underexplored part of Mexico's oil and gas industry, the country has long-hoped to capitalise on its unconventional resources given its demand for heavy crude diluent.
We affirm our long-held positive view for the accelerated development of natural gas pipelines in Mexico, with oil and gas pipelines set to continue expanding through 2017. Mexican consumption growth will remain strong over the coming years, driven by an expanding manufacturing sector and increased residential demand. We believe the major driver of this trend will be the government's efforts to expand the use of gas-fired thermal generation in the country's electricity mix, which will be increasingly fuelled by cheap gas imported from the US.
The Mexico Oil & Gas Report has been researched at source and features BMI Research's independent forecasts for Mexico including major indicators for oil, gas and LNG, covering all major indicators including reserves, production, consumption, refining capacity, prices, export volumes and values. The report includes full analysis of industry trends and prospects, national and multinational companies and changes in the regulatory environment.
BMI's Mexico Oil & Gas Report provides professionals, consultancies, government departments, regulatory bodies and researchers with independent forecasts and competitive intelligence on the Mexican oil and gas industry.
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Summary of BMI’s key forecasts and industry analysis, covering oil and gas reserves, supply, demand and refining, plus analysis of landmark company developments and key changes in the regulatory environment.
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