Charles W. Thurston, Latin America Correspondent09.30.19
Mexico’s state oil company Petróleos de Mexico (Pemex) is planning massive increases in both capital expenditures and maintenance in an effort to increase oil production in the country. The company’s five-year plan from 2019 to 2024 includes a program to drill 500 wells, build over 100 offshore production platforms and install more than 4,000 kilometers or close to 2,500 miles of pipeline, the company said.
The resultant demand for new industrial coatings, as well as corrosion-control and other maintenance coatings, is expected to rise with the increased spending. Pemex reported gross sales of $84.5 billion in 2018. The company has fully integrated operations in oil and gas exploration and production, refining, distribution and retail marketing, and petrochemicals. The company is also a leading crude oil exporter, with about 60 percent of its crude production exported, primarily to the United States and Canada.
Among new infrastructure plans for Pemex is a new $8 billion refinery at the Gulf Coast port of Dos Bocas, Tabasco State, the home of Mexican President Andres Manuel Lopez Obrador. Operation is expected come 2022 and the refinery is expected to process up to 340,000 barrels per day (b/d) of heavy crude oil.
The refinery will be supplied by a raft of oil production units including 20 new onshore and shallow water fields this year, of which 12 will begin production in 2019, the company reported. Pemex produces nearly 90 percent of its crude production from mature fields, according to SPGlobal.com.
One new onshore production investment of $6.4 billion will be in massive Ixachi Field, in Vera Cruz State. The plant has a projected production level of 750 million cubic feet per day (MMcf/d) and 80,000 b/d of light crude and condensates.
Apart from the new refinery, Pemex plans to refurbish six existing refineries in an effort to boost production of both oil and downstream petrochemicals.
“This new refinery will significantly increase our national fuel offer, and the rehabilitation of the six refineries that today make up the National Refinery System will cover the growing demand from the Mexican economy,” Pemex CEO Octavio Romero Oropeza said in a company statement in May.
Total Pemex CapEx investments this year have been planned at $9 billion. An emphasis on offshore exploration and production, as well as onshore transportation and refining is hoped to boost annual production to 2.4 million barrels of oil per day by the end of the Obrador administration in 2024 from a current level of 1.7 million b/d.
“Exploration allows us to envision a scenario of increased production, and we are anticipating the development of 20 to 40 fields per year throughout this Administration’s term. This allows us to forecast, with a degree of certainty, that we will achieve our goal of increasing production over the coming years,” said Oropeza.
In addition to CapEx investments, Pemex will enhance maintenance in both the upstream and downstream businesses. The company plans to spend $5.9 billion on upstream maintenance this year, according to the company’s latest Form 20F report to the U.S. Securities and Exchange Commission. The 2019 spending represents a rise of over 25 percent from 2018 and roughly double what was spent on maintenance five years ago.
The new investment levels are designed to stabilize the country’s decade-long reduction in oil production and to help improve Pemex’ debt load of close to $100 billion. The government is also allowing Pemex a $6.7 billion tax break this year to help it adjust its finances for the new spending.
Pemex is the largest company in Mexico and is its largest contributor. The importance of Pemex to the future growth of the Mexico economy is cricital. In comparison, Mexico industrial production has been relatively flat this year.
“Mexico’s oil supply declined sharply in 2018 bringing the country to the brink of being a net oil importer as the share of gas in the energy mix grew further,” British Petroleum reported. With the expected recovery of Pemex, the government forecasts 2020 economic growth of between 1.5 percent and 2.5 percent of the $1.3 trillion gross domestic product.
Credit risk analysts have not been sanguine about Pemex plans to accelerate spending. Fitch Ratings reported in August that “Pemex would require $5.5 billion of external funding during second-half 2019 to satisfy budgeted CapEx.” Nonetheless, additional foreign direct investment is expected the government to operate without tapping Pemex coffers as heavily. Foreign direct investment in Mexico rose 1.5 percent in the first half of the year to $18.1 billion, according to preliminary figures from the Secretaría de Economía.
In June, Fitch downgraded Pemex Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to BB+ from BBB-, with a negative outlook. “The downgrade of Mexico’s IDRs reflects a combination of the increased risk to the sovereign’s public finances from Pemex’s deteriorating credit profile together with ongoing weakness in the macroeconomic outlook, which is exacerbated by external threats from trade tensions, some domestic policy uncertainty and ongoing fiscal constraints,” Fitch opined.
One paint and coatings supplier that should gain from the increased Pemex spending is PPG’s Comex unit, which operates its Comex Industrial Coatings production facility in Tlalnepantla, in México State. Comex produces an average of 1.3 million liters (about 343,000 gallons) of paint and up to 1.5 million liters (396,000 gallons) during high demand, the company reports.
In April, Comex opened a new $8.8 million distribution center in Guadalajara, Mexico State, that enables the company to fulfill orders from its stores in Mexico within 24 hours, the company said in a statement. The center serves more than 600 stores in the western states of Jalisco, Nayarit, Colima, Aguascalientes, Zacatecas, Sinaloa, Michoacán and San Luis Potosí. Guadalajara is Mexico’s third-largest economic hub and a strategic location in PPG’s supply chain, the company said.
AkzoNobel, Axalta and Henkel are among other major paint and coatings manufacturers with a substantial presence in Mexico.
The resultant demand for new industrial coatings, as well as corrosion-control and other maintenance coatings, is expected to rise with the increased spending. Pemex reported gross sales of $84.5 billion in 2018. The company has fully integrated operations in oil and gas exploration and production, refining, distribution and retail marketing, and petrochemicals. The company is also a leading crude oil exporter, with about 60 percent of its crude production exported, primarily to the United States and Canada.
Among new infrastructure plans for Pemex is a new $8 billion refinery at the Gulf Coast port of Dos Bocas, Tabasco State, the home of Mexican President Andres Manuel Lopez Obrador. Operation is expected come 2022 and the refinery is expected to process up to 340,000 barrels per day (b/d) of heavy crude oil.
The refinery will be supplied by a raft of oil production units including 20 new onshore and shallow water fields this year, of which 12 will begin production in 2019, the company reported. Pemex produces nearly 90 percent of its crude production from mature fields, according to SPGlobal.com.
One new onshore production investment of $6.4 billion will be in massive Ixachi Field, in Vera Cruz State. The plant has a projected production level of 750 million cubic feet per day (MMcf/d) and 80,000 b/d of light crude and condensates.
Apart from the new refinery, Pemex plans to refurbish six existing refineries in an effort to boost production of both oil and downstream petrochemicals.
“This new refinery will significantly increase our national fuel offer, and the rehabilitation of the six refineries that today make up the National Refinery System will cover the growing demand from the Mexican economy,” Pemex CEO Octavio Romero Oropeza said in a company statement in May.
Total Pemex CapEx investments this year have been planned at $9 billion. An emphasis on offshore exploration and production, as well as onshore transportation and refining is hoped to boost annual production to 2.4 million barrels of oil per day by the end of the Obrador administration in 2024 from a current level of 1.7 million b/d.
“Exploration allows us to envision a scenario of increased production, and we are anticipating the development of 20 to 40 fields per year throughout this Administration’s term. This allows us to forecast, with a degree of certainty, that we will achieve our goal of increasing production over the coming years,” said Oropeza.
In addition to CapEx investments, Pemex will enhance maintenance in both the upstream and downstream businesses. The company plans to spend $5.9 billion on upstream maintenance this year, according to the company’s latest Form 20F report to the U.S. Securities and Exchange Commission. The 2019 spending represents a rise of over 25 percent from 2018 and roughly double what was spent on maintenance five years ago.
The new investment levels are designed to stabilize the country’s decade-long reduction in oil production and to help improve Pemex’ debt load of close to $100 billion. The government is also allowing Pemex a $6.7 billion tax break this year to help it adjust its finances for the new spending.
Pemex is the largest company in Mexico and is its largest contributor. The importance of Pemex to the future growth of the Mexico economy is cricital. In comparison, Mexico industrial production has been relatively flat this year.
“Mexico’s oil supply declined sharply in 2018 bringing the country to the brink of being a net oil importer as the share of gas in the energy mix grew further,” British Petroleum reported. With the expected recovery of Pemex, the government forecasts 2020 economic growth of between 1.5 percent and 2.5 percent of the $1.3 trillion gross domestic product.
Credit risk analysts have not been sanguine about Pemex plans to accelerate spending. Fitch Ratings reported in August that “Pemex would require $5.5 billion of external funding during second-half 2019 to satisfy budgeted CapEx.” Nonetheless, additional foreign direct investment is expected the government to operate without tapping Pemex coffers as heavily. Foreign direct investment in Mexico rose 1.5 percent in the first half of the year to $18.1 billion, according to preliminary figures from the Secretaría de Economía.
In June, Fitch downgraded Pemex Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to BB+ from BBB-, with a negative outlook. “The downgrade of Mexico’s IDRs reflects a combination of the increased risk to the sovereign’s public finances from Pemex’s deteriorating credit profile together with ongoing weakness in the macroeconomic outlook, which is exacerbated by external threats from trade tensions, some domestic policy uncertainty and ongoing fiscal constraints,” Fitch opined.
One paint and coatings supplier that should gain from the increased Pemex spending is PPG’s Comex unit, which operates its Comex Industrial Coatings production facility in Tlalnepantla, in México State. Comex produces an average of 1.3 million liters (about 343,000 gallons) of paint and up to 1.5 million liters (396,000 gallons) during high demand, the company reports.
In April, Comex opened a new $8.8 million distribution center in Guadalajara, Mexico State, that enables the company to fulfill orders from its stores in Mexico within 24 hours, the company said in a statement. The center serves more than 600 stores in the western states of Jalisco, Nayarit, Colima, Aguascalientes, Zacatecas, Sinaloa, Michoacán and San Luis Potosí. Guadalajara is Mexico’s third-largest economic hub and a strategic location in PPG’s supply chain, the company said.
AkzoNobel, Axalta and Henkel are among other major paint and coatings manufacturers with a substantial presence in Mexico.
