September 21, 2015
Authors: Olga Kerimova, Analyst, and Theodora Batoudaki, Analyst, Rystad Energy
Mexico’s production is in decline phase. The government of Mexico and the largest contributor to the country’s production, Pemex, are actively trying to reverse this trend by awarding 169 oil blocks to foreign operators. This article assesses the outlook for the Mexico E&P industry, illustrated by three key drivers: production, exploration success and spending.
Figure 1 depicts the production outlook for Mexico, split by projects, life cycle and onshore/offshore from 2010 to 2025. The production of three largest projects, Ku-Maloob-Zaap, Cantarell and Litoral De Tabasco, as well as the production from smaller fields, is declining. Mexico’s production is estimated to continue dropping from 2015 to 2017 but the decline will be smoother post 2017-2018, mainly thanks to the contribution of new offshore projects that are coming online, such as the shelf project Ayatsil. The impact of the Round One tender will be visible from 2025 and onwards, when production may start increasing again at a moderate pace.
Figure 2 shows the discovered volumes for Mexico from 2005 to 2014. There have not been any significant discoveries made since 2012, when Pemex discovered the deep water Kunah, Trion and Puskon fields. None of these discoveries, however, are expected to be put into production before 2020 and are not considered to be commercial at the current oil price forecast (not shown in Figure 2). The year with the highest discovered volumes in the last decade was 2008, when 1.6 billion boe were discovered, with more than half of the volumes coming from producing fields. Two major discoveries, Ayatsil-Tekel and Tsimin (Litoral De Tabasco), make up around 70% of the 2008 discovered resources, and 30% of the total volumes discovered over the last 10 years.
Figure 3 displays total spending in Mexico over the period 2010-2020. Investments (capex and exploration capex) are projected to increase over the next five years, reaching around $25 billion in 2020. The main drivers behind this growth are investments in projects currently under development as well as not yet sanctioned discoveries, needed to reverse Mexico’s declining production trend. Additionally, exploration capex is expected to grow after 2018 due to higher exploration spending forecasted for the blocks to be awarded under Round One. The operating costs (opex) are expected to remain stable at around 10 billion per year accounting for inflation (decreasing in real terms), consistent with declining production from mature fields shown in Figure 1.
Over the past five years, Mexico’s production has been declining as resources from mature fields are depleted and few new discoveries have been made to offset this trend. The blocks offered as part of the Round One tender may mitigate Mexico’s production decline. However, significant contribution to production is not expected before 2025 with the low oil prices and low-cost gas imports from the United States making developing these projects less attractive. Growing investments in not yet producing fields over the next five years may slow down, if not reverse, the decline in Mexico’s production post 2018.
Olga Kerimova, Analyst
Phone: +47 24 00 42 00
Theodora Batoudaki, Analyst
Phone: +47 24 00 42 00
About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), Africa as well as South East Asia.