Pemex Progress - not much positive Since there is not much news coming out of ROE I decided to see what progress Pemex is making.
Based on newspaper articles and Pemex 2019 1st quarter Report I have prepared some commentary reports on Pemex progress.
Commentary Report Number one
A progress report on how Pemex is doing with respect to bringing twenty new fields into production along with drilling at least 506 wells while bringing these 20 new fields into production. The initial news reports said Pemex would be drilling 506 wells to bring 20 new fields into production. In reality there are 117 wells to be drilled to bring the 20 new fields into production and the there will be about 390 wells drilled somewhere else on land in Mexico in 2019.
According to the article
https://www.eluniversal.com.mx/english/20-new-oil-fields-mexico-could-boost-pemex-production
In order to bring to bring the 20 new fields into production, there was reported to be contracts for 5 groups of wells. Group One has 16 wells with six in Esah, seven in Xihin,and three in Uchbal and these were to begin on 15 January.
Group two will start operating on Feb 15 drilling 22 wells, four in Pokche, three in Cheek, six in Mulch, five in Manik and four in Teacake through three contracts.
Group three will start drilling 24 wells on March 11 with three in Cahua, four in Jaatsul, four in Octli, four in Tetl, three in Teekit and six in Hok through three contracts which were open for bids.
Group four will begin operation on April 24, drilling 11 wells, six in Suuk, and five in Koban through two contracts.
Group five will begin drilling 44 wells on January 15, two in Chocol, four in Valeriana four in Cibix and 34 in Ixachi through three contracts.
The following article explains a major problem that Pemex has run into. You need jack up rigs to drill wells in shallow water.
https://www.oilandgaspeople.com/news/18774/mexican-companies-scramble-to-find-jack-up-rigs-amid-overwhelming-demand/
The above article explains the financing for drilling and contracting for jack up rigs.
AMLO says these 20 new fields, 16 of which are in shallow water off the coast will be in production within one year, by April, 2020 (Which is about 16 months after his announcement and 9 months from now.) These fields all need further wells drilled and they need jackup rigs to do the work and Pemex is only going to pay 20% of the upfront costs and the contractors have to pay the other 80 % and this is to be repaid to the contractors once the well is in production, which of course is not going to happen immediately upon completion of the well. Of course they can’t bring the wells into production and be paid until all of the wells they have contracted for are in fact drilled and ready to produce oil and are connected to a production platform.
Mexico still needs to contract and build most of the production platforms and still needs to build the pipelines and so on.( Pemex needs to build at least 13 new production platforms -see later) So these companies are not going to see much money for a long time so one wonders how quick they are going to be when it comes to drilling. But drilling can’t start until they have the rigs. This article spells out some of the challenges. Latina group which won one of the contracts has already pulled out.
Some of these rigs are not to be mobilized until December, so how are they going to have all of all of these wells drilled and on production by next April.
If Pemex only has the funds to pay 20% until production it begs the question of where is Pemex going to get the money to pay up once these wells are completed?
If they don’t pay, all drilling will likely stop. These are extremely expensive wells to drill.
As of June, only one rig of the 15 contracted has been confirmed. Not on site, just confirmed as available.The contracts are for period of 18 to 24 months.So much for getting the fields into production by next April. Nobody has drilled any wells as of the date of the article which was June 6, 2019.