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Mexican Pemex's oil output falls 145,000 b/d on year in July amid declines at aging fields

Mexico City — Mexican state oil company Pemex said Monday its oil production dipped 5,400 b/d month on month to 1.840 million b/d in July, and was down 145,000 b/d year on year, due to a decrease in production at mature fields in southern Mexico.

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Pemex's production has been in constant decline since peaking at 3.4 million b/d in 2004. The company is still mainly responsible for Mexico's oil and gas output as no significant production has been added by private companies since the country ended its state monopoly over the energy sector in December 2013.

Production at shallow water fields offshore Tabasco in southern Mexico was down 53,800 b/d year on year at 304,200 b/d in July. Xanab is Pemex's largest field in this region; output there fell 41,900 b/d on year to 120,500 b/d in July.

Xanab began production in 2010 and peaked at 175,100 b/d in May 2017. The field still has over 236 million barrels of 2P reserves, according to Mexico's National Oil Commission, and Pemex awarded contracts in the first half of the year to install a new pipeline sand platform in the field.

Pemex has said it expects to increase production towards year end to 1.95 million b/d by fast-tracking the development of heavy oilfield complexes Ek-Balam and Ayatsil-Tekel-Utsil in H2. Both groups of shallow water fields are located in Campeche Bay along with the giant Ku-Maloob-Zaap or KMZ and Cantarell complexes.

KMZ is Mexico's largest producing asset, responsible for almost half of the country's output. Its production remained stable on month at 876,700 b/d in July, and was up 6,000 b/d on year. The complex is expected to begin terminal decline next year.

Pemex plans to reopen a closed well and enhance oil recovery techniques such as water injection at onshore fields like San Ramon and Blasillo in a bid to boost output. Its onshore oil output in southern Mexico fell 42,200 b/d to 227,400 b/d in July.

The company's most substantial decrease was for light crude, which fell 148,165 b/d on year to 563,600 b/d in July, impacting the utilization rate at its simple configuration refineries in Mexico.

The company's natural gas production excluding nitrogen edged down 33 MMcf/d on month to 3.86 Bcf/d in July, and was down 417 MMcf/d on year. Pemex's gas production is down from an historic high 5.5 Bcf/d in 2009, primarily due to maturing fields offshore Tabasco as well as non-associated output in Burgos and Veracruz basins, which fell 90 MMcf/d on year to 600 MMcf/d and 67.2 MMcf/d to 170 MMcf/d in July respectively.

Natural gas production has fallen since the Mexican government cut Pemex's budget amid the retreat in oil prices in 2014. As a result, the company has focused on more profitable upstream oil projects while seeking partners to develop its gas portfolio.

--Daniel Rodriguez, newsdesk@spglobal.com

--Edited by Wendy Wells, wendy.wells@spglobal.com