Mexican Ministry of Energy recognizes that it will not reach government's oil goal, market sees opportunities for new farmout agreements

For the first time, an official report highlights the inability of this administration to recover and reach the oil production goal of 2.2 million barrels per day by the end of the six-year period, which pushes the idea that there are possibilities of openings for new farmout agreements in the market.

According to the Five Year Plan 2020-2024 of the Ministry of Energy headed by Rocio Nahle, the peak of production will not occur during this six year period, but until 2031, in 2.13 million barrels, which contradicts the arguments usually given by officials in charge of the country's energy policy. From there, Pemex only reaches 1.8 million.

The plan -delivered late, due to the difficulty that the pandemic imposed on this study-, does not contemplate new projects. However, it maintains a message of strong centrality for Pemex: "A strategically important purpose for the current government is the rescue of Pemex so that it can once again operate as a lever for national development, as well as stabilize and increase production".

In a conversation with LPO, analyst Gonzalo Monroy emphasized: "Since the government knows that they are not going to achieve their goal, it is very possible for them to see where Pemex's production is increasing and it could be through a farmout agreement. That could open up a possibility," he said.

The analyst's interpretation also coincides with Nahle's own speech, since in her appearance before the Senate a few days ago, she affirmed that she was not closed to this type of contract. "I would vote in favor", she said while remembering that she is part of the Board of Directors of the oil company. What she does say is that this possibility is in the court of Pemex. "They are the ones who have to present the proposal, and if it is viable, go ahead," she assured.

The turn in the discourse occurs at a time of strong turbulence for the sector due to the low demand for crude due to the impacts of the Covid-19 pandemic and the high uncertainty about its recovery. Therefore, Pemex's goal of reaching 1.9 million barrels this year is severely questioned among experts.

Beyond this issue, the expert also highlights a topic after reviewing the Sener document: "We see a warning signal for those who have contracts, because as Pemex's production is not enough to feed the dream of the refineries, it now states that private companies will sell to the State, which is not in the contracts," warned the expert.