Mexico’s Pemex plans to reopen mature oil wells in a bid to increase production, which has been in a steady decline for years.
According to a Reuters report, the Mexican state energy firm filed a report with the U.S. Securities and Exchange Commission saying it expected this year’s average daily oil output to 1.58 million barrels daily. This compares to a government production target of 1.8 million barrels daily.
To stem this decline, Pemex seems to be considering reopening idled wells, according to sources that Reuters did not name. The sources noted that restarting idled wells would not be a simple matter, involving assessment of the risk profile of each well and how fast it could resume production.
Pemex has more than 31,000 wells across the country, onshore and offshore. Of these, about a third are idled. Some 4,800 are classed as operational, meaning they can be restarted—at a cost. Yet the production decline needs to be reversed because it is affecting exports. In January this year alone, exports of crude fell by 44%, which was the lowest export rate since 1990.
Pemex has also had problems with the quality of its oil. Earlier this year, reports emerged that Gulf refiners were shunning Pemex oil cargos because of unacceptably high water content. At the time, media reports suggested that the company’s financial trouble may have a role to play in the situation, as the Mexican state energy major is having trouble paying outstanding bills of some $20 billion to suppliers of chemicals and equipment for reducing the water content in its crude oil.
Pemex reported an 11.3% decline in oil production for the first quarter of the year, which sank the company into a net loss of some 2.12 billion. The company attributed the loss to natural depletion at mature fields, combined with insufficient new well completions. The target of 1.8 million bpd in output by the end of 2025 remains. The last time Pemex pumped 1.8 million bpd was in March last year, Reuters noted in its report.
By Charles Kennedy for Oilprice.com
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