New Pemex CEO takes helm to reverse production declines

09 September 2009 01:40  [Source: ICIS news]

MEXICO CITY (ICIS news)--New leadership at the helm of Mexico's state-run oil giant Pemex has some analysts hoping for broader private sector participation upstream as production of crude.

President Felipe Calderon's move on Monday to replace Pemex chief executive Jesus Reyes Heroles with former chief financial officer Juan Jose Suarez Coppel is seen a part of sweeping efforts to regain political leverage following bitter losses suffered by Calderon's party during the midterm congressional elections.

In its January 2009 annual report, Pemex announced a 9.2% drop in overall oil production, citing the precipitous decline of the Cantarell oil field - the nation’s biggest.

Production reached 2.80m bbl/day in 2008, down from about 3.08m bbl/day in 2007.

This was its lowest level since 1995, when it only reached 2.62m bbl/day.

It also indicated that the amount of exported oil also had its worst showing in 13 years, falling 16.8% from 2007 to 1.40m bbl/day.

From January to July 2009, oil production has since dropped from 2.69m bbl/day to 2.56m bbl/day, according to the Energy Secretariat.

Market analysts at Pritchard Capital Partners issued a research note hinting that this may push the country to further open the oil industry to private investment.

“This follows reports late last week that Mexico’s Energy Minister Georgina Kessel said that the country would have to reevaluate the strategy for Chicontepec [a petroleum basin north east of Mexico City] moving forward given production shortfalls,” the analysts said in a research note. “The reports indicated that Chicontepec [a petroleum basin north east of Mexico City] will produce 60,000 bbl/day by the end of this year vs. a previous forecast of 72,000 bbl/day,” the note said.

“The delays from Pemex were widely expected and concerning in the short-term for oil service firms with exposure to Mexico due to potential penalties or delayed revenues,” the analysts continued. “However, the long-term implications may incentivise the country to more aggressively expand efforts and thus potentially present a greater role for Western oil service firms.”

A Pemex Petroquimica source said the company does not see any change in Mexico's petrochemical prices as a result of the leadership change, and that it was too soon for the new appointee to start looking at petrochemical production.

Pemex's petrochemical sales have fallen in the last year.

According to its most recent earnings report, in the second quarter of 2009 only 0.67% of Pemex's sales came from petrochemical sales for a total of Mexican pesos (Ps) 5.1bn ($383m, €268m). This is down from 2.4% of sales in the same quarter last year with petrochemical sales of Ps 9bn.

Figures from the nation's Energy Secretariat show nationwide sales by volume of petrochemicals has fallen 21% from January to July this year from 369.9m tonnes to 292.5m tonnes.

($1 = Ps13.33) ($1 = €0.70)

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By: James Young
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