Declining: Mexico oil production goes down
Mexico oil production down 7.9%
Mexican oil production fell 7.9% during the first five months of this year to an average of 2.65 million barrels per day.
The low production during the first five months will make it more difficult for Pemex to meet this year’s goal of 2.7 million bpd on average.
Pemex saw exports fall 15% on average to 1.24 million bpd from 1.46 million bpd during the first five months of last year.
Mexico gets over a third of government revenue from oil, leaving it at risk of a fiscal crunch if production and exports continue to slide at current rates, a Dow Jones report said.
In recent years, the company has had to shut-in oil wells at Cantarell because it lacked the infrastructure to process increasing volumes of natural gas and water coming up through the oil wells.
"We have a lot of operational problems managing the gas," Miguel Angel Lozado, an executive at Cantarell, said during a seminar last week.
He said Cantarell finally has enough water separation equipment to start reopening water-producing wells, and the company is installing equipment to process and reinject the gas back into the reservoir.
The company also plans to lengthen some gas-producing wells lower into the reservoir to reduce the gas content and inject foam to separate the gas from the oil.
Pemex flares 16% of the gas it produces, mainly due to the high nitrogen content of the gas at Cantarell and other marine fields.
Pemex has injected nitrogen into Cantarell for around a decade to improve reservoir pressure and production, and now it needs to separate this nitrogen from the gas.
Pemex plans to reduce flaring to 3% by the end of this year by installing infrastructure to reinject gas back into the reservoirs and installing new equipment to separate nitrogen from natural gas.
Mexico is just starting to ramp up exploration at its traditional areas in shallow waters of the Gulf of Mexico and in deeper waters.
Most of the finds it has made will produce around 100,000 bpd or less at peak output, compared with 2 million barrels at Cantarell when it peaked in December 2003.
This puts additional pressure on Mexico to find larger fields deeper in the Gulf of Mexico.
Average output at Cantarell was 753,000 bpd during the period, making it the country's second largest producer behind Ku Maloob Zaap, which pumped 803,000 bpd on average.
Pemex plans to roll out new incentive-based oil service contracts before the end of this year in an effort to lure large international oil companies into deep-water projects where Pemex lacks experience.
An energy reform approved last year gives Pemex more flexibility to draft service contracts, but it is still legally blocked from selling equity stakes in oil projects.
Pemex has also been hit with lower prices this year.
Mexico's average export price was down 51.2% this year through May at $43.90 a barrel.