Pemex struggles as production falls and Petrobras deal offers limited relief

Mexico’s state-owned oil company Pemex is facing production challenges and financial strain. A new partnership with Brazil’s Petrobras aims to boost its technical abilities in deepwater extraction. Experts warn of further declines in output if current trends continue. Pemex has cut capital investment in its exploration and production arm by 5.9% in the first quarter of 2023. The planned investment was 86.7 billion pesos, but actual spending fell to 81.6 billion pesos. This reduction has led to fewer operational wells, with active drilling rigs dropping from 32 to 25 in the first five months of the year.

The company’s production target is 1.8 million barrels per day, yet current output stands at 1.6 million. Analysts predict a sharper decline, with Gonzalo Monroy of GMEC warning production could fall to 1 million barrels by next year. Miriam Grunstein of Rice University’s Mexico Center adds that lower crude exports and reduced extraction are costing the company revenue.

To counter these issues, the Mexican government has partnered with Petrobras. The collaboration will focus on reviving mature fields, reprocessing seismic data, and exploring deep and ultra-deep waters. Under the current administration, 10 mixed-investment contracts for oil exploration have already been awarded. However, Pemex’s goal of producing 450,000 barrels per day from these contracts will not be achieved until after 2033. Pemex’s financial and operational cuts are reducing output and revenue. The partnership with Petrobras may improve technical capabilities, but significant production gains remain years away. Without further intervention, experts foresee a continued decline in crude extraction.