Mexico’s effort to add oil wells falters
A drive by Mexico’s national oil company to drill new wells at 20 “priority” fields largely using smaller, local service providers is faltering, with the company expected to re-bid some of the work in the year ahead.
Industry analysts say they see little evidence a decision by Petroleos Mexicanos to use a closed bidding process with pre-selected companies is speeding up drilling at a time when the government is pressing to boost a stalled economy. The bidding, completed by May, leaned chiefly on local contractors in “survival mode” that bid low just to get the work, said Pablo Medina, vice president of Welligence Energy Analytics.
In some cases, he said, they lacked expertise and were unable to secure needed equipment. The end result: Only two of the 20 fields were producing by the end of November, data from the National Hydrocarbons Commission shows. And Pemex is now expected to re-tender at least nine rigs, according to Borr Drilling Ltd., a contractor expanding in Mexico.
“They were supposing that they could bring these fields online quicker, but they haven’t,” said Jorge Sierra, a senior analyst at Wood Mackenzie Ltd., by telephone from Mexico City. “The contractors that won the packages for drilling the priority fields haven’t had the experience of managing integrated service contracts, like the big international ones such as Schlumberger and Halliburton.”
The push to add around 100 new wells came in a year when Mexico’s gross domestic product remained flat, with oil and gas generating about 18 percent of the government’s second-quarter income. Meanwhile, Mexico President Andres Manuel Lopez Obrador has said he plans to raise the minimum wage by 20 percent in 2020 to improve conditions for the nation’s poorest workers.
Pemex declined to respond to questions about the tenders or its well-drilling schedule. The company’s crude production was 1.70 million barrels a day in November, about one million barrels short of its 2024 output target.