Mexico’s regulatory authorities have all hands on deck to improve the administrative processes of oil and gas infrastructure projects while PEMEX is injecting investment attraction practices for its farmouts. Meanwhile, the US dollar and crude oil prices set new challenges for the global economy.
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Pipeline construction time doubles as reported by the Mexican Natural Gas Association (AMGN), given the country’s new regulatory framework and permitting process can lengthen a process where it can take up to four years to operate 200km of pipelines, whereas the previous regulatory framework only required 24 months.
Gasoline production drops 24 percent. In May 2017, PEMEX produced 322,000 b/d compared to May 2018’s 245.6,000 b/d. To compensate this decrease, gasoline imports reached 520,00 b/d, which amounts to 65 percent of the country’s total sales.
Bureaucracy weighs heave on the energy sector. Overregulation and overlapped administrative procedures to comply with said regulation are hampering investments. Yet, the Mexican Association of Hydrocarbon Companies (AMEXHI) highlights the progress and openness that regulatory authorities are willing to implement in improved and streamlined processes.
PEMEX modifies farmout bidding bases. CNH’s governing board approved the modification of the bidding bases for seven onshore contractual areas in Tabasco, Veracruz and Chiapas to provide greater certainty to the investment of the interest private parties.
Contracts and farmouts set to reach 40 percent of Mexico’s exploratory wells. Yet, Licensing Rounds must continue to foster exploratory activities, set to start diminishing by 2020 based on the ongoing exploration works from the first two Rounds. AMEXHI estimates US$ 640 billion will be required for Mexico to produce 2.8 MMb/d, whereas at its peak, PEMEX only allocated US$16.5 billion.
Zama 2022. In an interview with El Sol de México, Sierra Oil & Gas’ CEO, Iván Sandrea, expects the production chapter of the saga of Zama is set to begin by 2022.
US$12.047 billion. That is the amount of investment in Exploration and Contract Development CNH has authorized by June 13, 2018. Shallow water takes the lion’s share with US$10.064 billion, followed by US$1.467 billion for deep water and US$517 million in onshore.
Licencing Round contracts are election-proof. In an interview with Reforma, Carla Gabriela González Rodríguez, CNH’s Executive Secretary, clarified that the Hydrocarbon Law establishes the regulatory body as the only entity authorized to cancel the contracts, which only arises if the operating company is not complying with its obligations outlined in the contract.
Exchange rates and crude oil prices, the prelude of a perfect storm for global economies. A strengthened US dollar, parallel to an increase in crude oil prices, is presenting “a challenging eternal scenario,” according to Eduardo Guardia, Brazil’s Minister of Finance.
Venezuela’s debacle leaves its mark in its oil industry. S&P Global Platts reports PDVSA is struggling to maintain crude production and refining activities due to the critical state of its economy.
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