BMI View : Pemex has ordered oilfield services from Petrofac and Doris Engineering for the development of the Lakach field. This is Mexico's first deepwater gas development, and illustrates both the company's will to tap its offshore resources and its lack of technological expertise required to do so . W e beli e ve the field could come online by 2015-2016, slightly improving our production forecast for the country.
Unlike Mexico's oil production, the countr y's gas output has remained mostly stable since 2008 . Most of its production is concentrated in the north- eastern Burgos Basin and reached an estimated 46bn cubic meters (bcm) in 2012. Mexico's growth , however , is driving a steep increase in gas demand , which progressively generates a large import requirement , an increasing amount of which are coming from the US via pipelines . While current net imports are estimated at 16bcm, these could break through 50bcm by 2022.
In early March, Pemex undertook steps to contract oil field service s for the development of the deepwater Lakach field. This raise s our expectations that the field , situated north-west of Coatzacoalcos in Veracruz State , could come online by 2015 -2016 . The field is targeted to produce around 6.2bcm at peak.
|Opening The Seabed|
|Mexico Gas Production, Consumption & Net Imports - With Or Without Lakach (bcm)|
Pemex allocated two different contracts - one with UK's Petrofac and one with France's Doris Engineering . The deal s include services such as deploying and supervising the planned subsea wells and infrastructures required for production. Two pipelines and an onshore processing plant will be installed and could be tied to other newly discovered offshore fields later on. This development both constitute s Mexico's first deepwater gas project and illustrate s Pemex's reliance on foreign technologies for deepwater development .
Pemex's lack of substantive technological expertise to tap on its deepwater resources is contributing t o the country's oil output decline. The size and bureaucratic aspect of the company resulted in several mismanagements which, combined with a constitutional impossibility to open Mexico's hydrocarbon production to foreign investors, limit oil and gas exploration and output. It is therefore critical for Pena Nieto to find a way to open the country to foreign investors and foreign technology in order to monetise its deepwater resources.
So far, the constitutional requirement for ground resources to be owned exclusively by the government (i.e. State owned company, Pemex) has impeded such a critical development (see our online service, January 18 2013, ' Finding The Political Will To Modernize Mexico's Energy Sector ') . With Labour and Education reform passed late 2012 and early 2013, and with the communication competition reforms proposed early March, we are expecting that the energy sector reform will be put on the table.
In case such a liberalisation would happen, it would provides a strong signal for the two oilfield services companies ahead of expected liberalisation of the Mexican oil and gas market. This will bring large opportunities for offshore- oriented oilfield services companies in partnership with Pemex , as most of the country's untapped resources lie in the Gulf of Mexico.
Gas Links To Strengthen
Mexico's gas prices are linked to the US Henry Hub benchmark, pushing down domestic prices, increasing imports from the US and reducing incentives for production. Current cheap prices are pushing higher gas consumption by Mexican industries , but also for power generation (see our online service, February 25 2013, 'Midstream Companies To Benefit From Growing Gas Pipeline Demand' ) . Increased production in the US is therefore creating a downside risk to our production forecasts.
|Thank You For Fracking|
|Mexican Imports From The US, mcm, (LHS), & Pipeline Import Price, US$/mmBTU (RHS)|