Mexico will likely cut its crude oil production targets for next year, according to Bloomberg, citing a ruling party lawmaker in Mexico.
The shift in strategy signals that Mexico’s state-run oil company, Petroleos Mexicanos (Pemex), is still struggling under a mountain of debt.
Pemex just dropped its production in its largest offshore field, Maloob, by 30.8% year over year, to 276,000 in July, according to IHS Markit. That is down from nearly 400,000 bpd in July 2019 and 460,000 bpd from April 2018—a high for the field.
Although it was understood that Maloob’s production would gradually decline through 2030 as the field depletes, the dropoff was sharper than anticipated.
That output reduction in Maloob brought Mexico’s crude production to 1.54 million barrels per day—a level not seen since the 1970s, according to data from Mexico’s National Hydrocarbon Commission.
That output loss isn’t going to help Pemex’s dire financial straits.
Mexico had targeted more than 2 million barrels per day next year, but this is looking increasingly unlikely, according to lower house Budget Committee Chair Erasmo Gonzalez who spoke to Bloomberg.
It won’t hit this year’s target of 1.83 million bpd either. From January to July this year, Pemex has produced an average of just 1.692 million bpd—although the pandemic certainly played a hand in depressing Mexico’s output.
Mexico will release its official budget next Tuesday, but Gonzalez confirmed that Mexico would plan on $40 oil next year.
Mexican President Lopez Obrador made big promises to the country regarding its oil industry, claiming that Pemex would be the linchpin in the declining industry’s turnaround.
Mexico is still betting heavily on its oil industry despite the pandemic and its debt issue, with plans to build an $8 billion oil refinery in Obrador’s home state of Tabasco.