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Pemex to press on with aggressive upstream program, add 70,000 b/d of oil output by year end

Highlights

Pemex expects to add 320,000 b/d from 20 new fields by end of 2021

Company aims to develop 20-40 new fields every year

Program to have a major focus exploring southern Mexico's foothill potential

Mexico City — Pemex plans to implement its aggressive upstream program rapidly and expects to begin producing oil from 12 new fields before the end of the year after discovering three fields so far in 2019, the CEO of the state-owned company said.

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"Everything related to the infrastructure for the 20 new fields this year is contracted at 100% and is currently being executed," Octavio Romero Oropeza said late Tuesday in an event webcast from Veracruz.

In August, Pemex will begin producing hydrocarbons at the Xikin shallow water field, followed by the Cahua, Octli, Teekit, Esah, Cheek and Mulach shallow water fields in November.

The company will bring an additional 70,000 b/d of oil production online by the end of 2019 as well as 124 MMcf/d of natural gas, including the December production startup of the Suuk, Pokche, Tetl, Jaatsul, Koban, and Hok shallow water fields.

In 2020, Pemex will start or ramp up production at the onshore Cibix, Chocol, Ixachi, Valeriana fields and the shallow water Uchbal, Manik and Tlacam fields.

LOOKS TO INCREASE OUTPUT

Pemex expects to produce 267,000 b/d and 611 MMcf/d from these 20 fields by the end of 2020, reaching a peak production of 320,000 b/d and 908 MMcf/d by the end of 2021.

Pemex hopes to produce 2.48 million b/d on average by 2024, President Andres Manuel Lopez Obrador's last scheduled year in power.

The company produced 1.7 million b/d in April, half the volume it produced during in 2003 before depletion began at giant offshore complexes like Cantarell.

The cost to develop the 16 offshore fields Pemex is planning to bring online is $1 billion, which includes 13 offshore platforms and 14 oil and gas pipelines.

The company has also undertaken contracts for the drilling of 74 onshore and offshore wells to develop these fields at the cost of $2.5 billion. Contracts to drill 31 wells to develop 10 of these offshore fields are pending.

The company will also issue tenders at the end of May for the construction of new offshore platforms and drilling contracts to expand production at its mature Yaxche and Onel fields.

Both fields were developed over the last decade and have a combined 165 million barrels of proved and probable reserves. Their combined production is currently 75,500 b/d.

NEW DISCOVERIES

The company said it plans to find 20 commercial developments in 2019, the same number of fields it found over the last four years.

Going forward, it expects to increase discoveries until reaching 40 new fields per year in 2023. All of these fields will be developed right away, Oropeza said.

"This allows us to estimate with a good degree of certainty that we are going to fulfill the objective of increasing our producing in the coming years," he added.

In 2019, the company plans to drill 50 exploration wells, he said. So far, it has made three commercial discoveries: Quesqui-1, Tema-1 and Ichilan-1.

A significant focus for Pemex's exploration efforts is going to be the foothill trend along the Veracruz Basin extending into the Chiapas Foldbelt Region.

Pemex estimates this trend could hold 1.5 billion barrels of oil equivalent in prospective resources. In this, the company discovered the giant Ixachi field, which has over 1.3 billion boe of proved, possible and probable reserves.

Ixachi is expected to produce 80,000 b/d of light crude and condensate plus 600 MMcf/d of gas by 2023, Pemex said. The company has begun its development, which is expected to cost Peso 58 billion ($3 billion), and the field currently produces 3,900 b/d and 30 MMcf/d, Pemex said.

Pemex also Tuesday said it planned to drill two new appraisal wells, Ixachi-1101 and Ixachi 2001, hoping to extend the field's reserves further.

In recent weeks, Mexico's National Hydrocarbon Commission already approved two other high-pressure, high-temperature exploration targets in the Veracruz Basin. These are Rabassa 1001-EXP and Yaxjut-1EXP, which are set to be completed before the end of 2019.

-- Daniel Rodriguez, daniel.rodriguez@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com