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Mexico Oil and Gas Report Q1 2010
Business Monitor International, Dec 2009, Pages: 73
Mexico Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mexico's oil and gas industry.
The latest Mexico Oil & Gas Report from BMI forecasts that the country will account for 24.10% of Latin America regional oil demand by 2014, while providing 23.20% of supply. Latin America regional oil use of 6.93mn barrels per day (b/d) in 2001 reached an estimated 7.74mn b/d in 2009. It should average 7.90mn b/d in 2010 and then rise to around 8.61mn b/d by 2013. Regional oil production was 10.30mn b/d in 2001, and averaged an estimated 9.67mn b/d in 2009. It is set to rise to 10.78mn b/d by 2014. Oil exports have been slipping, because demand growth has exceeded the pace of supply expansion. In 2001, the region was exporting an average 3.37mn b/d. This total had fallen to an estimated 1.92mn b/d in 2009 and is forecast to recover to 2.17mn b/d in 2014. The principal exporters will be Mexico, Venezuela, Ecuador and Brazil.
In terms of natural gas, the region consumed an estimated 201.2bn cubic metres (bcm), with demand of 256.4bcm targeted for 2014, representing 27.4% growth in 2009. Production of an estimated 217.5bcm in 2009 should reach 299.0bcm in 2014, and implies 42.6bcm of net exports the end of the period. Mexico in 2009 consumed an estimated 31.31% of the region’s gas, with its market share for 2014 forecast at 30.03%. In 2009, it produced an estimated 25.28% of the region’s gas, and is expected to be contributing 20.07% by 2014.
For 2009 as a whole, we have assumed an average OPEC basket price of US$59.00 per barrel (bbl), a 37.3% decline year-on-year (y-o-y). This represents an upgrade from the US$55.00/bbl forecast we were using in the previous quarter. For 2010, we expect to see a significant oil price recovery to US$83.00/bbl for the OPEC basket price, gaining further ground to US$85.00 in 2011 and to US$90.00/bbl in 2012 and beyond.
For 2009, BMI has assumed a global average gasoline price of US$67.46/bbl, with the fuel having peaked in June at almost US$80.00/bbl. The overall y-o-y fall in 2009 gasoline prices is put at 33.7%. The BMI gasoil forecast is for an average price of US$70.59/bbl, assuming a monthly high above US$94/bbl in December 2009. The full-year outturn represents a 41.8% y-o-y fall. The annual jet price level for 2009 is estimated at US$68.45/bbl. This compares with US$124.95/bbl in 2008. The 2009 average naphtha price is put by BMI at US$52.66/bbl, down 39.7% from the previous year’s level. Mexican real GDP in 2009 is estimated by BMI to have fallen by 7.1%, compared with growth of 1.3% in 2008. We are assuming average annual 2.8% growth in 2010- 2014. Unless the government introduces a radical shift in energy policy, we expect state-owned Petróleos Mexicanos (Pemex) to retain full responsibility for oil production, without international oil company (IOC) involvement. We are assuming oil and gas liquids production of no more than 2.50mn b/d by 2014, with the country expected to pump 2.83mn b/d in 2010. Beyond the extreme weakness of 2009, consumption is forecast to increase by no more than 1.5% per annum to 2014, implying demand of 2.08mn b/d by the end of the forecast period. The net export capability would therefore be approximately 424,000b/d by 2014. Gas production is forecast to increase from an estimated 55bcm in 2009 to 60bcm over the period, with 17bcm of net imports required by 2014.
Between 2009 and 2019, we are forecasting a decrease in Mexican oil production of 22.9%, with crude volumes falling steadily to 2.31mn b/d in 2019. Oil consumption between 2009 and 2019 is set to increase by 12.5%, with growth slowing to an assumed 1% per annum towards the end of the period and the country using 2.18mn b/d by 2019. Gas production is expected to rise gradually, from an estimated 55bcm in 2009 to 71bcm in 2019. With demand growth of 58.7%, this implies a need for imports to rise from 8bcm to 29bcm between 2009 and 2019. Details of BMI’s 10-year forecasts can be found in the appendix to this report.
Mexico now shares ninth and last place with Chile in BMI’s updated Upstream Business Environment rating, in spite of its vast hydrocarbons resource base. It lags well behind Bolivia, so is unlikely to move further up the league table over the short term. While the absolute resource base may be large, the output growth outlook is modest, reserves-to-production ratios (RPR) are low, state ownership of oil assets is absolute and country risk is relatively high. The country ranks sixth in BMI’s Downstream Business Environment rating, reflecting its high levels of oil and gas consumption, refining capacity and moderate country risk, plus low levels of forecast oil and gas demand growth. Peru and Trinidad are arguably within reach, at just one point ahead, while Ecuador is three points behind and unlikely to mount a challenge for sixth place.
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