Efforts by Mexico’s national oil company, Pemex, to drill new wells at 20 “priority” fields largely using smaller, local service providers isn’t working, with the company expected to re-bid some of the work this year, Kallanish Energy finds.
Industry analysts told Bloomberg they see little evidence a decision by Pemex to use a closed bidding process with pre-selected companies is speeding up drilling at a time when the government is pressing for more production to boost a stalled economy.
Local contractors in ‘survival mode’
The bidding, completed by May, leaned chiefly on local contractors in “survival mode” that bid low just to get the work, Pablo Medina, vice president of Welligence Energy Analytics, told Bloomberg.
In some cases, he said, they lacked expertise and were unable to secure needed equipment. The end result: Only two of the 20 fields were producing by the end of November, data from the National Hydrocarbons Commission shows.
Inexperienced oilfield service providers
“They were supposing that they could bring these fields online quicker, but they haven’t,” Jorge Sierra, a senior analyst at Wood Mackenzie Ltd., in Mexico City, told Bloomberg. “The contractors that won the packages for drilling the priority fields haven’t had the experience of managing integrated service contracts, like the big international ones such as Schlumberger and Halliburton.”
Efforts to add roughly 100 new wells came in a year when Mexico’s gross domestic product remained flat, with oil and gas generating about 18% of the government’s second-quarter income, Bloomberg reported.
Mexico President Andres Manuel Lopez Obrador (aka, AMLO) has said he plans to raise the minimum wage by 20% in 2020 to improve conditions for the nation’s poorest workers.
Production down considerably
Pemex declined comment about the tenders or its well-drilling schedule. The company’s crude production was 1.70 million barrels a day (Mmbpd) in November, roughly 1 Mmbpd short of its 2024 output target.
The setbacks are among several faced last year by Pemex. The world’s most indebted oil company has been hit with a “brain drain” following salary caps for public servants, it has months of unpaid bills, and continues to recover from a November cyberattack. In mid-December, the company’s head of exploration was fired amid a corruption probe, Bloomberg reported.
Despite Pemex’s difficulties, Lopez Obrador, who supports a state-centered economic model, has taken steps to reduce the role of international oil companies. One of the Mexican president’s first policy moves when he came to his office a year ago was to suspend competitive oil rounds where foreign producers were able to participate. He has also blocked Pemex from finding new partners to help develop existing projects.
This post appeared first on Kallanish Energy News.