In 2019 confidence is buoyed for a potential worldwide increase in exploration and production, particularly so in North America, where rig activity levels are demonstrably on the increase.
Our January blog looks back at global trends from the past 12 months that we feel will influence 2019 and beyond. We also analyse in depth the North American continent with particular focus on Mexico. We also hope to feature other countries over the year to provide context and interest.
the global scene and growth scenarios
The market is generally picking up, seeing investment in the upstream industry set to increase six percent year-on-year according to PriceWaterhouseCoopers.
North America in particular, is investing more in oil and gas exploration and is driving growth in capex:
Wood MacKenzie has published its 'Five things to watch in the global upstream industry':
1. Upstream spending still on a leash
2. Record year for Liquified National Gas (LNG) project sanctions
3. OPEC (Organization of the Petroleum Exporting Countries) crude capacity set to grow
4. More Permian mega-deals ahead
5. 20 million boe (barrel of oil equivalent) up for grabs
Despite recent price volatility the fundamentals for 2019 are encouraging. Project sanctions are increasing in both number and scale. Tight oil production is thriving, the next wave of liquified natural gas sanctions is threatening to break, and 2019 is likely to be a monumental year for discovered resource opportunities.
No doubt, the industry and Claxton will be writing on how these global predictors pan out next year, it will be interesting to see if such optimism is realised.
A FOCUS ON THE MEXICAN WAVE
Claxton, part of the Acteon Group of companies, works closely with our sister operating company InterMoor, (a global mooring, foundations, and subsea services company), who have strong experience in the region and particularly in Mexico, where exciting growth opportunities exist.
The picture is one of substantial change for Mexico from previous years due to the recent liberalisation of the country, an increase in capital expenditure and the potential for exploratory drilling.
THE DRIVING FACTORS
From 2006-2015 the US annual exports of petroleum products from the US into Mexico showed a year-on-year increase illustrating their dependence and reliance on the US.
The rising trajectory in the above graph demonstrates the upward reliance on US production, as previous output had been slow, and Mexico struggled to meet its energy demands.
The understanding that although the potential was there to exploit (according to the Oil & Gas Journal (OGJ), Mexico had 9.7 billion barrels of proved oil reserves as of the end of 2015), the investment had been inadequate to support it and may, almost certainly, have been the catalyst to open-up the industry to international energy operators.
To quote Goldman Sachs : “Despite Mexico’s abundant hydrocarbon reserves, its historical under-investment in hydrocarbon exploration and production (E&P), has limited the country’s ability to create incremental energy supply.” (To put this in context from 1976 to 2016 Mexico drilled 367 exploration wells in the Gulf of Mexico in comparison to 3434 drilled by the US in the same area.)
In August 2014 with a determined effort to address the declines of its domestic oil production, the Mexican government enacted constitutional reforms that ended the 75-year monopoly of Petroleós Mexicanos (PEMEX), the state-owned oil company, allowing investment and the creation of a new regulator.
The National Hydrocarbon Commission (CNH), as regulator, encouraged oil service and mapping firms to expedite work and opened Pemex’s data to seismic firms, licensing them for 12 years to re-process and sell compiled data.
In countries including Brazil and Venezuela, state-run oil companies have kept most of their seismic data from rivals, giving them an advantage in areas where they are considered strong.
2018 A STATE OF CHANGE
Moving forward, 2018 has been a definitive year which saw a new Government in control and setting energy priorities, including increasing the domestic production of oil; furthermore, the country became the first in Latin America to join the IEA (International Energy Agency).
Quoting Joaquín Coldwell, Mexico’s Secretary of Energy: “We will take our part in setting the world’s energy policies, receive experienced advisory in best international practices, and participate in emergency response exercises.”
With the industry now liberalised and the release of seismic data, discovery of fields has ensued: Zama field (expected to produce 400-800 million barrels of oil equivalent, and the Manix-101 and Mulach-1 field presuming a 180m barrels collectively).
potential for claxton in the region
For Claxton, the opportunities in the region centre around drilling and asset life extension, and with new discoveries and an influx of activity there may be opportunities to come.
“The changes in the Mexican energy industry has allowed significant improvements to the sector and will continue into 2019 and beyond. The country has abundant reserves and by liberalising the industry and increasing investment, Mexico is reinstating its position as a major oil producer."