[ad_1]
Mexican upstream regulator Comisión Nacional de Hidrocarburos (CNH) has given the green light for the local subsidiaries of European energy giants BP plc and Equinor ASA to pull out of their participation in a deepwater block offshore Veracruz and Tabasco states.
The Mexico branch of France’s TotalEnergies SE will now assume control of the Salina basin contract. A license on the block was granted to the consortium in an upstream bidding round in 2016. Equinor had said that the block was in “a largely unexplored deepwater area.”
The director of Mexico energy consultancy GMEC, Gonzalo Monroy, told NGI’s Mexico GPI six blocks won during bid rounds during the previous Mexico government are also being returned to the CNH. He said the moves, however, have more to do with changing global strategies and capital discipline at major energy companies than politics.
“Mexico, as a frontier undeveloped play, is not as attractive as other global opportunities. If we take into account the strict capital expenditure discipline, no one is salivating over Mexico. Also, both BP and Equinor are pivoting to more eco-friendly solutions. Equinor is the prime example of this,” he said.
He added that “the oil is just not there” and “I think politics are not as relevant as some people think.”
Alfredo García, managing director at consultancy Siete Energy, told NGI’s Mexico GPI that Mexico’s legal setup offers security to upstream firms. There are no threats of expropriations, he said.
Shortly after taking office in late 2018, President Andrés Manuel López Obrador suspended the awarding of new oil and gas contracts to private sector firms. But he has pledged to respect the 111 contracts awarded under the previous government.
But, “among the majors, there’s definitely a disillusionment and disappointment for how things are evolving in the sector, which wasn’t what many expected” when they invested in Mexico, García said.
Equinor announced last year that it was pulling out of Mexico as part of a widespread shift in its global portfolio. “We have no plans for future upstream activity there,” Equinor spokesperson Ola Aanestad told NGI’s Mexico GPI. Equinor is also leaving Nicaragua.
“But that does not impact other countries in the region. Brazil is one of our core areas and we are growing in Argentina,” he added.
The Norwegian supermajor is targeting net zero emissions by 2050. More than 50% of gross annual investments by 2030 are to be directed to renewables and low carbon investments.
Others Staying Put
To date, Equinor is the only company completely pulling out of Mexico’s upstream. Other companies have stayed firmly committed to Mexico for the long term.
For example, Italy’s Eni SpA, one of Mexico’s leading private sector oil producers, earlier this year announced that a floating production, storage and offloading (FPSO) vessel had arrived offshore Tabasco, allowing for production to ramp up in the Area 1 development.
Eni executives said Mexico was a “core country in the strategy of future organic growth.” The company’s Mexico production stands at around 20,000 boe/d. Output is forecast to ramp up to 65,000 boe/d in 2022 and reach a plateau of 90,000 boe/d in 2025.
[Empower Your Business: Check out NGI’s newly updated Mexico Gas Price Index and Mexico Data Suite, which now includes daily, bidweek and forward natural gas prices at 43 locations in Mexico. Learn more.]
To date, private sector output is still a small fraction of overall production in Mexico.
Mexico’s gas output averaged 3.85 Bcf/d in 2021, versus 3.84 Bcf/d in 2020, according to CNH data. Private sector gas output fell to 203.8 MMcf/d from 225.1 MMcf/d.
Mexico’s oil production, meanwhile, was flat at 1.66 million b/d in 2021. Private sector oil production rose during the year to 64,191 b/d from 53,919 b/d.
[ad_2]
Source link