The hypothesis was fulfilled. The forecast that analysts had about the failure of Pemex’s priority fields is a reality. One of the main strategies of President Andrés Manuel López Obrador to increase oil production was a good attempt to improve the direction of the company, but little else.
The plan for the priority fields was announced in December 2018, just a few weeks after the start of the Moreno administration. The first goals seemed ambitious, but convenient for a company that wanted to raise its oil production to 2.6 million barrels per day (mbd), a figure not seen in more than a decade. National oil production was then at 1.7 mbd, between Pemex and private companies.
The first plan listed 20 projects with which Pemex would add 157,000 barrels of crude per day by 2020 and add 20 new discoveries per year. At the end of the six-year term, there would be around 120 new projects.
All those announcements have been planned. Three years later, the company adds 25 assets to its portfolio of priority fields – the expectation for this moment was at least 60-. Of the first list, only 16 register production, four have been discarded or do not report extraction of any type of hydrocarbons. Chocol, Esah, Jaatsul and Suuk no longer appear in the presentations that the company shows to its investors.
In general, none have met the expectations set by Pemex, according to the figures reported monthly by the National Hydrocarbons Commission (CNH). The oil company has had to redo most of the plans it submitted to the regulator, because the downward variation in its estimates has exceeded 30%.
“All of this has been the result of the overvaluation of the fields. This is a promise that was simply too much, ”says a senior CNH official who asked not to be named.
The commission is in charge of approving and monitoring the plans that the private oil companies and Pemex have. And, although it approved those presented by the state company directed by Octavio Romero Oropeza for the development of these fields, sources within the organization explain that the company received the go-ahead with information gaps and unrealistic expectations.
“What they did was overvalue the deposits. They drilled a well, said that it was a field that could be commercially interesting and that therefore it was within the conditions to be able to take it to development.
“But when they started, they realized that their deposit was not as big as they had considered it. And so, the plan totally fell apart, it has fallen one by one,” says the source.
It is a usual tactic of the oil company, which has become more anchored this six-year term, say industry consultants. Pemex, they add, presented its priority fields with very few studies behind it and without the drilling of a large number of wells to prove their viability.
The specialists say that the action has responded to a political pressure derived from the presidential intention to take the company to a state that no longer seems possible.
“No company with market investors is going to develop projects like this, because, basically, when you don’t understand the resource and the basins well enough, you can destroy value,” says John Padilla, Managing Director of the IPD consultancy. “The moment you start drilling for production, if you haven’t done enough exploration and a development plan, you can produce resources quickly, but you have no understanding of how much damage you can do to that field and how many resources you are going to leave on the ground. ”, He adds.
Pemex raised expectations for this year and set a goal to extract 300,000 barrels of crude per day from these developments, but the latest figures up to September –the most recent ones– show that the maximum production from these fields has been 114,000 barrels per day of crude and around 35,000 condensates –light liquids that can be refined, used in gas complexes or mixed with heavier crude–, according to an analysis carried out by the consulting firm IPD Latin America with data from the market regulator.
Pemex assures that the production of its priority fields is higher and in its third quarter report it highlighted that in September it achieved a production of 162,000 barrels of oil per day. Of the 25 projects that it has as a priority, it has a production of 280,000 barrels per day.
The state-owned company, CNH sources and industry consultants say, has established a tactic to present the extracted condensates as crude oil in its reports to demonstrate the viability of López Obrador’s priority plan. The discrepancies between the figures reported by Pemex and those compiled by the CNH have monthly variations of up to 50,000 barrels per day, according to the information compiled by IPD, when using different temperatures to account for its production.
Pemex, for example, adds the extraction of condensates –a product that is valuable but cannot be counted as oil– from Ixachi, Valeriana and Quesqui –the first two are part of the initial list of priority fields– to inflate the figure that it regularly presents. to its investors.
Ixachi is the clearest example of the bad planning of the fields, say the consultants. The state company has sold the field as the main engine for the growth of its production, but this asset is only a gas and condensate producer. In its last presentation, in October, Pemex assured that this field produces around 25,000 barrels of crude per day, but the CNH report reveals that it is condensed.
The failure in the strategy, say the analysts consulted, is materialized in the constant drops that the federal administration has made in its production goals for the six-year term. What began as the goal of exceeding 2.6 million barrels a day has become a goal of exceeding two million barrels at the end of the six-year term, with the argument of prioritizing use for subsequent generations, according to the president, and thus support the fight against climate change.
