The International Energy Agency (IEA) is forecasting a substantial decline in oil supply from Mexico between 2024 and 2030, a trend that would most likely result in lower natural gas production as well.
Mexico is expected to post “the single largest capacity loss of any producer in the world due to underinvestment” during the period, IEA researchers said in the Oil 2024 medium-term outlook published earlier this month.
Associated gas tied to oil production accounts for about 52% of Mexico’s domestic gas output, according to government data. State oil company Petróleos Mexicanos (Pemex) has mostly prioritized crude oil projects over gas-directed drilling.
Mexico’s oil supply, which IEA defines as including crude, condensate and natural gas liquids, is expected to plunge by 640,000 b/d to around 1.5 million b/d in 2030, researchers said.
Mexico’s “long-term oil production decline showed a brief respite from 2021-2023 as the Quesqui condensate field ramped up in earnest,” researchers said. “The sector has floundered since the pandemic, when Pemex severely curtailed investments. Since then, the state-owned operator has dealt with a continued string of serious incidents with its offshore platforms, undermining public and partner trust.”
Quesqui was the country’s leading natural gas producing field in April at 585 MMcf/d, according to upstream regulator Comisión Nacional de Hidrocarburos (CNH).
Meanwhile, outgoing President Andrés Manuel López Obrador’s government requested that Pemex “focus on quick crude production growth from onshore and shallow-water fields to the detriment of larger resource deepwater reservoirs,” the IEA team said. “As of now, over half of Pemex’s production comes from just seven of its 240 fields.”
Researchers added, “Looking forward, the picture doesn’t change much, with only two major projects expected to start up over the forecast period – the 100,000 b/d Trion field and the 80,000 b/d Pit project. And unlike some of its neighbors, Mexico doesn’t have a robust queue of other pre-sanctioned projects waiting to backfill production as existing fields mature.”
As for the Dos Bocas oil refinery, the flagship project of the López Obrador administration, the IEA authors said, “Reports of its imminent commissioning have waxed and waned as the project continues to face start-up issues. We anticipate it will come online no earlier than the fourth quarter of 2025, with the full ramp-up taking several years.”
Pemex itself is a major consumer of natural gas in Mexico, with the refining segment accounting for about one-fourth of the company’s gas demand according to Wood Mackenzie data. IEA expects Pemex’s overall refinery utilization rate to grow by 11% from 2024-2030 amid ongoing investments to upgrade the company’s downstream facilities.
Flaring Challenge
On the environmental front, Mexico retained the unenviable distinction of being a global Top 10 flarer of natural gas by volume in 2023, according to new analysis by the World Bank.
The top nine flaring countries are in order: Russia, Iran, Iraq, the United States, Venezuela, Algeria, Libya, Nigeria and Mexico. Together they are responsible for 75% of global gas flaring but only 46% of global oil production, researchers highlighted.
The news was not all bad for Mexico, as its flared natural gas volumes fell to 5.49 Bcf in 2023 from 5.67 Bcf in 2022, a roughly 3% decline. Mexico’s flaring intensity, meanwhile, improved to an estimated 7.77 m3 of natural gas per barrel of oil produced in 2023 from 9.05 m3/bbl in 2022.
The United States, by comparison, flared an estimated 2.04 m3/bbl in 2023, from 1.84 m3/bbl in 2022.
Pemex has set a goal to achieve zero routine flaring in the upstream segment and a 30% reduction in methane emissions by 2030.
