Posted on 04/18/2010 5:20:15 AM PDT by thackney
Auditors have urged Mexico to slash its broadest oil and gas estimate at a flagship project, two officials briefed on the matter said this week, the latest blow to the country’s embattled oil industry.
The auditors recommended that state oil monopoly Pemex cut more than 7.5 billion barrels of oil equivalent at the Chicontepec onshore oil project in Mexico, which the country was betting on to save tumbling production.
Management at the oil monopoly rejected the recommendation, which would wipe out more than 17 per cent of the 43 billion barrels of oil equivalent (boe) of proved, probable and possible reserves (3P) Pemex claimed to have at the start of the year, the sources said.
“The auditors said that because of the performance of the (Chicontepec) fields, Pemex should reduce its reserve estimate there. They think the 3P figure should be cut by more than a third for the time being as current efforts are not yielding enough results,” said one of the people, who declined to be named and was not authorized to speak publicly on the issue.
A deep cut in 3P reserves would not have an operational impact on Pemex but would raise further questions about its strategy to stop the decline in Mexican oil output and prevent the country, currently one of the United States’ main suppliers of oil, from becoming a net oil importer within the decade.
Auditors, hired by Pemex to certify their reserves, based their recommendation on the poor performance of the troubled Chicontepec oil project, which has repeatedly failed to achieve production goals.
Pemex declined to comment on the specifics of the recommendations but said it had already told its bondholders the reserves estimate could be affected by a government review. “It has been clearly stated that these reserves are under revision,” said Pemex told Reuters in a statement.
Mexican oil production has fallen by nearly a quarter since 2004, putting heavy pressure on the government, which relies on crude exports to fund around a third of its budget.
Analysts say Mexico could be reduced to a net oil importer by 2015, given current trends of falling crude oil exports and rising imports of gasoline and other refined products.
Regulators last week sharply criticized Chicontepec as poorly planned and at risk of being a waste of billions of dollars. Pemex had hoped the field would help replace oil production capacity being lost at aging offshore fields.
Officials at the companies Pemex has hired to certify its reserves declined to comment, citing confidentiality agreements.
Mexico has few other options to replace output lost at the giant Cantarell oilfield in the near term due to years of underinvestment in exploration.
Mexico has been trying to develop oil deposits in the Chicontepec area for years, but the challenging geology has repeatedly forced it to scale back output estimates. Oil in the area is locked in small pockets of rock and cannot flow easily to the surface, making development technically challenging.
Chicontepec pumped just over 29,000 barrels per day of oil at the end of 2009, less than half of what Pemex forecast at the start of the year. The company scaled back this year’s goal for the project to producing an average of 48,000 bpd, down from its previous target of 176,000 bpd.
Pemex managers said on a conference call with bond investors in March they expected that a new approach to studying the technical challenges at Chicontepec called “field laboratories” would soon produce good enough results to sustain their estimate of 3P reserves at the field.
The company has hired five oil services firms, including Halliburton Corp, Schlumberger Inc, and Weatherford International Ltd, to perform the field laboratory work at Chicontepec.
So you’ve got a guaranteed product with guaranteed sales and you still cannot manage to get it out? Oh yeah its state owned.
Can we assume they have already tried Hydro Fracting? Or do they lack the necessary skill set to do so?
Pemex ping!
If you want on, or off this S. Texas/Mexico ping list, please FReepMail me.
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