Pemex Partners To Invest $250 Million In Two Onshore Blocks In Mexico

Two private partners of Mexico's state-run oil company Pemex will invest a combined $250 million in two projects over the next four years as they aim to quickly ramp up crude output, according to plans approved on March 5.

The joint venture (JV) partnerships with Pemex were initiatives championed by Mexico's previous government following a sweeping 2013 energy reform, but have come under sharp criticism from current President Andres Manuel Lopez Obrador, who favors a more state-centric oil policy.

DEA Deutsche Erdoel AG holds the partnership rights with Pemex on its Ogarrio block and the development plan approved March 5 by Mexico's independent oil regulator calls for fresh investment of $161 million through 2023.

The plan commits the German firm to drilling 10 new wells while finishing 10 others, and projects oil output to grow from nearly 5,000 barrels per day (bbl/d) currently to more than 11,000 bbl/d in 2020, according to the regulator, the National Hydrocarbons Commission (CNH).

Meanwhile, a second Pemex partner, Egypt's Cheiron Holdings Ltd., will invest $88.7 million in the Cardenas-Mora block, according to the CNH-approved development plan.

The plan sees oil production ramping up to more than 9,000 bbl/d in 2020 from 5,800 bbl/d currently and envisions the drilling of four wells this year, along with major repairs scheduled on another four wells.

Both Ogarrio and Cardenas-Mora are located in southern Tabasco state, just off Mexico's Gulf coast, and their development plans estimate that the government will ultimately reap 54% of the projects' proceeds.

Cheiron and DEA Deutsche operate the projects with a 50% stake, while Pemex holds the remaining half.

"I think the [JVs] are a very good tool that the reform gave Pemex that are showing very favorable results for the government," said CNH Commissioner Sergio Pimentel prior to the approving the plans.

He noted that Pemex had tried to develop the projects alone for years.

Oil production at Cardenas-Mora, for example, began in the late 1970s, and rose to around 180,000 bbl/d by 1984, according to CNH data. But output has dropped precipitously since then as cash-strapped Pemex diverted investment elsewhere.

Last month, Lopez Obrador appeared to suggest that his government will not offer more opportunities to partner with Pemex until existing projects begin to show results.

The CNH is scheduled later this year to auction Pemex partnership rights to seven more onshore areas, tenders that the regulator has said are proceeding as normal.