Worlwide offshore rig utilization dipped slightly this week to 84.3%. This decline of one contracted rig was due to a total of 5 rigs coming off contracts while 4 idle rigs started new contracts, with most of the activity occuring in the Gulf of Mexico.
Both candidates have publicly expressed their desire to make sure that Pemex, Mexico's state-owned oil company, is a competitive and viable enterprise, but their visions of making that happen are somewhat murky. Mr. Calderón has openly expressed his desire to improve and open the Mexican petroleum industry, saying that he favored allowing foreign investment in the form of "strategic alliances" that would bring needed technology and financing for deepwater prospects that are currently out of Pemex's depth. Mr. López Obrador has focused his vision on reducing inefficiencies and aiming to improve productivity within Pemex, stating that foreign investment in the petroleum industry would not be palatable to the Mexican Congress.
With Mr. Calderón's apparent victory, the prospect of further opening the Mexican oil industry to outside investment is now a real, though somewhat distant, possibility.
To give some perspective on the current state of affairs within Pemex under the Fox administration, we'll take a look back at some of the key indicators over the past several years.
The graph below outlines Pemex's yearly exploration and production capital expenditures over the last 6 years for which information is available from Pemex.
1999 to 2004
Reflections in the Rig Count
That level of jackup activity has made Pemex the world's leading jackup operator. For 2003, 2004, and 2005, Pemex contracted more jackup days than any other operator in the world. Interestingly, though the company led in terms of the number of days contracted, it only led in terms of total day rates paid during 2003. In both 2004 and 2005, other companies paid out significantly more on jackup day rates than Pemex for fewer overall rig days.
Looking at 2006, Pemex has spent about $230 million on jackup contracts thru June, and is already contracted to spend another $290 million in the second half of the year. That will put Pemex total jackup expenditures for 2006 well above $500 million, its highest level in at least 10 years.
Those expenditures and rig contracts have allowed Pemex to drill a reported 74 exploratory wells and 150 development wells in the waters offshore Mexico from 1999 to 2004. More than half of those 224 wells were drilled in 2003 and 2004 as Pemex contracted more jackup days than any other company in the world.
For Their Efforts
The table below outlines the production of crude oil from Pemex of the 1999 to 2004 time frame. Overall, oil output increased about 16% over the 6 year time frame. The majority of the increase came from increased production in the Northeast Marine Region, which includes the supergiant Cantarell oilfield.
1999 to 2004
Counting on Cantarell
The Akal field was discovered in 1976, with a well that flowed 34,000 bopd. The field was put into production in 1979, and by 1981, the field was producing 1.16 million bpd from 40 wells, which is about 29,000 barrels from each well. By 1994, production had declined to about 900,000 bpd. In 1997, Pemex began a program of nitrogen injection that helped to greatly increase production from Cantarell, raising production from 1.6 mbpd in 1997 to over 2.1 mbpd in 2003.
In 2001, each of the wells in the Cantarell complex produced an average of over 9,000 barrels of oil per day. These wells are excellent producers, producing about 9 times as much as the average Mexican oil well, which averages about 1,000 bopd. As such, getting oil out of Cantarell has been very cheap for Pemex. Congressman Francisco Carrillo Soberón, a member of a legislative energy commission, said it costs between $2 and $3 to get a barrel of crude out of Cantarell.
Pemex has indicated that production from the Cantarell field has peaked and is set to decline in 2006. With rather steep declines of 14 to 16% in the next several years, it has been estimated that the Cantarell field will only be producing about 1 million bopd by the end of 2008.
A Not-so-Bright Future
However, there is some hope for optimism with the discovery of the 10 billion barrel Noxal field in the deep waters of the Gulf, growing production in Veracruz, and the potential for more discoveries in Mexico's northern waters closer to the US border. These new developments, along with the major investments that Pemex has made over the last several years, could help to sustain the company from a precipitous decline.
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