BMI View: Mexico's historic energy sector liberalisation mark s the start of a fundamental shift for 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 amid the broad industry downturn.
|e/f = BMI estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||2,779.3||2,590.6||2,412.5||2,353.2||2,407.1||2,493.4||2,561.5|
|Dry natural gas production, bcm||45.4||45.0||44.5||44.3||44.9||46.3||47.7|
|Dry natural gas consumption, bcm||73.3||76.9||81.5||87.3||91.6||94.8||97.7|
|Refined products production, 000b/d||1,409.1||1,276.6||1,289.4||1,302.3||1,341.3||1,408.4||1,429.5|
|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|
Latest Updates And Key Forecasts
Mexican national oil company (NOC) Pemex will remain under significant financial and operational strain over the remainder of the year. Whilst the strengthening of crude benchmark prices over 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 over the next several months will weigh on Mexico's already downbeat outlook, limiting investment into existing projects by Pemex. We therefore maintain our downbeat expectation for total liquids production in 2016 at -6.9% y-o-y implying a reduction of 180,000b/d this year. This compares to a decline of 6.4% y-o-y in 2015 and extends Mexico's overall losses for a 12th consecutive year.
A key objective of the company's new 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 and the USD4.2bn government bailout in April 2016 represents the start of a more concerted effort to set the company back on track. However, the NOC still needs significant capital to achieve its USD21.1bn financing program for the year.
The Mexican government's USD4.2bn bailout of Pemex underscores the state-owned oil company's continued struggles in the face of an elevated debt burden, sizeable arrears to oilfield service providers and limited liquidity. In order to limit an increase in its liabilities, Pemex will increasingly look at previously untapped methods of financing to satisfy its obligations. An example of this includes the USD1.2bn sale and leaseback agreement signed with US-based private equity fund KKR in June 2016. Moreover, the company's USD760mn Japanese 10-year bond issuance on July 15 at a rate of 0.54% will diversify the company's debt distribution away from its heavily-USD denominated profile, thereby reducing currency risk.
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.
In July, the National Hydrocarbons Commission (CNH) approved contracts and auction terms for 15 shallow water blocks in the states of Veracruz, Tabasco and Campeche, marking the start of Round Two. The tenders will launch later in 2016 with the winner expected to be announced on March 22 2017.
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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BMI Industry View
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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Analysis of the major Strengths, Weaknesses, Opportunities and Threats within the upstream and downstream sectors and within the broader political, economic and business environment.
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Historic data series and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key downside risks to the main forecast:
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- Production, Consumption, Capacity & Reserves: Proven oil reserves (bn barrels), production, consumption, refinery capacity and throughputs (‘000b/d); proven gas reserves (tcm), production and consumption (bcm) and fuels trade.
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BMI’s Oil & Gas Risk Reward Index
BMI’s Risk Reward Indices provide investors (independents, NOCs, IOCs, oil services companies) looking for opportunities in the region with a clear country-comparative assessment of the upstream and downstream market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points to provide indices of highest to lowest appeal to investors, with each position explained.
A profile of the upstream and downstream sectors, including analysis of reserves, output, consumption and trade of energy products; overview of the industry landscape and key players; assessment of the business operating environment and the latest regulatory developments.
Comparative company analyses by USD sales, % share of total sales, number of employees, year established, ownership structure, oil production (‘000b/d), gas production (bcm), downstream capacity (‘000b/d) and % market share.
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