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Pemex further cuts crude oil production, impacting business plan
🇲🇽 Mexico /Economy & Trade

Pemex further cuts crude oil production, impacting business plan

From El Universal · () Spanish

Translated from Spanish, summarized and contextualized by DistantNews.

At a glance

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  • Mexico's state-owned oil company, Pemex, reduced its investment capital for oil exploration and production by 5.9% in the first quarter, falling short of its planned budget.
  • This budget cut impacts the company's production capacity, moving it further away from its goal of extracting 1.8 million barrels per day.
  • Experts warn that Pemex's reduced crude oil extraction and prioritization of its refineries signal a declining commitment to oil production in Mexico, with potential long-term economic consequences.

Pemex has further curtailed its crude oil production, slashing investment capital for its exploration and extraction arm by 5.9% in the first quarter. The company allocated 81.6 billion pesos, falling short of the 86.7 billion pesos initially budgeted.

We are flying straight and non-stop to 1.2 million barrels per day in 2027, which means that once water is discounted, we would be at one million extraction next year.

— Gonzalo MonroyDirector General of the consultancy GMEC, commenting on the projected decline in Pemex's oil production.

This reduction directly impacts Pemex's production platform, pushing it further from its business plan target of 1.8 million barrels per day. Current output stands at 1.6 million barrels daily. Analysts like Gonzalo Monroy of GMEC predict a steep decline, projecting production to fall to 1.2 million barrels per day by 2027, with actual extraction potentially dropping to 1 million barrels next year after accounting for water content.

The situation is alarming in the short term because Pemex loses income by ceasing to sell crude abroad, extracting less oil, and prioritizing feeding the National Refinery System.

— Miriam GrunsteinAcademic at Rice University's Center for the U.S. and Mexico, discussing the implications of Pemex's production cuts.

GMEC's data, based on Pemex reports, shows a decrease in active drilling rigs from 32 to 25 between January and May. While the current administration has implemented mixed investment schemes for exploration and extraction, including 10 contracts awarded since 2018, the projected output from these ventures is not expected to materialize until after 2033.

The government of Sheinbaum is betting on renewable energy generation projects. Meanwhile, the budget cut in crude extraction indicates that the country no longer has a conviction or vocation for oil.

— Miriam GrunsteinAcademic at Rice University's Center for the U.S. and Mexico, interpreting the government's energy policy.

Miriam Grunstein, an academic at Rice University's Center for the U.S. and Mexico, expressed alarm over the short-term situation. She noted that Pemex is losing foreign exchange revenue by reducing crude exports and prioritizing its refinery system. Grunstein suggested that the current government's focus on renewable energy projects, coupled with the budget cuts in crude extraction, indicates a waning national commitment to oil production. She highlighted a stark contrast in investment volumes between renewable energy and oil exploration, warning of a difficult reality ahead due to the "alarming" abandonment of extraction activities.

If you compare the activity in renewable energy plants versus exploration and production, there is no comparison in investment volumes. At some point, we will face a very harsh reality. The abandonment of extraction has been so much that it is alarming.

— Miriam GrunsteinAcademic at Rice University's Center for the U.S. and Mexico, highlighting the disparity in energy sector investments.
DistantNews Editorial

Originally published by El Universal in Spanish. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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