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February 2012. Cycles. &. Trends. An Overview to Energy Sector in Mexico. 2011-2012. Index. Chapter II. Energy Sector. Oil & natural gas reserves Production Exports Scenarios Investments Pemex strategies. Chapter II Energy Sector. Reserves at January 1st , 2011.

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February 2012

Cycles

&

Trends

An Overview to Energy Sector in Mexico

2011-2012


Index

Chapter II

Energy Sector

  • Oil & natural gas reserves

  • Production

  • Exports

  • Scenarios

  • Investments

  • Pemex strategies


Chapter II

Energy Sector


Reserves at January 1st , 2011

(Billion boe)

50

14.3

43.1

45

40

35

28.8

15

30

25

20

13.8

15

10

5

0

Proven

Probable

2P

Possible

3P

Oil & Natural Gas Reserves

At January 1st, 2011, hydrocarbon proven reserves are 13,796 billion barrels of crude oil, 74% corresponds to crude oil; 9% to condensates and plant liquids, and the rest, 17% , to dry gas.


Oil & Natural Gas Reserves

R

Reserves Evolution

Hydrocarbon reserves evolution

(Billion barrels)

70

58.2

56.2

Possible

Probable

Proven

60

53.0

50.0

48.0

46.9

46.4

50

45.4

44.5

43.6

43.1

43.1

25.1

23.5

21.9

20.1

40

18.9

16.5

17.6

15.5

14.7

14.3

13.8

14

30

21.2

15.3

15.1

15.8

21.3

14.5

14.2

15

17

15.8

16

20.8

20

10

14.8

14.7

14.6

14.6

14.3

14.2

13.4

13.1

13

12

11.3

10.3

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011


Evolution of crude oil reserves

(Billions of barrels)

Possible

Probable

Proven

35

30.9

30.5

30.6

30

10.4

10.2

10.4

25

20

10.4

10

10.7

15

10

10.1

10.1

5

9.7

0

2009

2010

2011

Oil & Natural Gas Reserves

From 2010 to 2011, crude oil reserves 3P increased by 62 MMboe, mainly due incorporation of 878 MMboe exploratory crude oil. Proven reserves decreased by 259 MMboe as result of production of 940 MMboe in 2010.


Natural Gas Reserves Evolution

(Billion cubic feet)

Possible

Probable

Proven

70

60.4

61.2

61.3

60

16.8

17.3

17.6

50

40

20.7

20.9

20.1

30

20

23.7

23

22.6

10

0

2009

2010

2011

Oil & Natural gas reserves

From 2010 to 2011 3P reserves of natural gas increased in 39 Billion cubic feet, due mainly discoveries of 2,724 billion cubic feet of gas. In this way, it was possible to offset a significant production volume of 2,562 billion cubic feet that were extracted during 2010.


Evolution of hydrocarbon discoveries

(MMboe)

2000

1,773.9

1800

Possible

Probable

Proven

1600

388.9

1,482.1

1,437.8

1400

230.8

363.8

1200

1,053.2

490.3

966.1

312.1

1000

182.8

182.9

548.6

800

229.1

492.6

600

894.8

894.8

400

569.7

554.1

200

377.8

0

2007

2008

2009

2010

2011

Oil & Natural Gas Reserves

Between 2007-2010 exploratory activities have allowed incorporate sustained volumes annually of reserves up to 1,000 MMboe, this situation has made possible fulfill commitments of incorporate reserves by exploration .


Evolution of recovery rate of proven reserves

(%)

100

90

80

70

60

50

40

30

20

10

0

2004

2005

2006

2007

2008

2009

2010

2011

2012

25.5

22.7

26.4

41

50.3

71.8

77.1

85.8

100

%

Oil & Natural Gas Reserves

Recovery rate of proven reserves will reach a value of 100% in 2012, due reclassification of probable reserves to proven reserves, these will come from the development of projects such as Ku-Maloob Zaap, Crudo Ligero Marino, Bellota-Chinchorro and Chicontepec, among others.


Production

In Mexico, oil production has decreased since 2005. Main reason is declining of Cantarell Asset. This field had its maximum production in 2004 and then began a descendant trend in a constant way.

Crude Oil Production in Mexico, 1900-2025 (Thousands of barrels per year)


Crude Oil Production by type 2002-2011

(Thousand barrels per day)

Heavy

Light

Ultra light

4,000.0

3,370

3,382

3,333

3,255

3,500.0

3,177

3,075

2,791

3,000.0

2,601

2,576

2,550

2,500.0

2,000.0

1,500.0

1,000.0

500.0

0.0

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

156.9

134.8

135.3

144.1

180.4

198.6

210.4

269.7

320.0

336.0

Ultra light

846.6

810.7

789.6

802.3

831.5

837.7

815.5

811.8

834.4

794.0

Light

2,173.7

2,425.4

2,458.0

2,387.0

2,243.8

2,039.4

1,765.6

1,529.0

1,422.0

1,419.0

Heavy

Production

In 2011 Pemex achieved to consolidate stability in crude oil production. Pemex modified descendant trend during period 2007-2009, when registered an accumulative total declining of 475,000 barrels daily.


Oil Production of the three main Assets

(MMboe)

2,500.0

2,000.0

1,500.0

Cantarell

1,000.0

500.0

Ku-Maloob-Zaap

Litoral Tabasco

0.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Production

Reversing decline in oil production in recent years was possible primarily by increasing production in Ku-Maloob Zaap, Litoral Tabasco, Crudo Ligero Marino and Ixtal-Manik projects. They have partially compensated decline in Cantarell.


Natural Gas Production by type, 2002-2011

(MMcfd)

8,000.0

7,000.0

6,000.0

5,000.0

Gas non

4,000.0

associated

3,000.0

Gas associated

(include nitrogen)

2,000.0

1,000.0

0.0

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

1,271.7

1,305.4

1,379.2

1,563.3

1,863.9

2,266.1

2,613.0

2,598.8

2,550.3

2,477.5

2,205.0

Gas non associated

3,239.0

3,118.1

3,119.2

3,009.6

2,954.1

3,090.0

3,445.4

4,319.8

4,480.3

4,542.5

4,390.0

Gas associated

Production

Last year Pemex Exploration & Production showed a contraction in extraction of natural gas associated and non-associated, due the declining production in the main regions: Marine, South and North.


Exports volume crude oil

(Thousand barrels daily)

Istmo

2,000.0

1,843

1,870

1,817

Olmeca

1,705

1,792

1,755

1,800.0

1,686

Maya

1,755

1,600.0

1,361

1,338

1,403

1,400.0

1,222

1,200.0

1,000.0

800.0

600.0

400.0

200.0

0.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Exports

On 2011, Pemex achieved a stable crude oil export platform. Lower international sales during 2008 and 2009 are explained by the global economic slowdown that led to a reduced demand of energy.


Value of Crude Oil Exports

(Million dollars)

49,322.0

50,000.0

43,341.5

45,000.0

37,937.5

40,000.0

35,985.0

34,706.8

35,000.0

28,329.4

30,000.0

25,605.4

25,000.0

21,257.9

20,000.0

16,676.3

14,552.9

13,392.2

11,927.7

15,000.0

10,000.0

5,000.0

0.0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Exports

Pemex achieved a significant increase of 37.4% in revenues from foreign sales of crude oil during last year, this due the high price (101 dollars per barrel) registered by Mexican oil in the international market.


Pemex Annual Trade Balance

(million dollars)

60,000

Exports

50,000

Imports

Balance

40,000

30,000

20,000

10,000

0

2006

2007

2008

2009

2010

2011

Exports

Pemex registered a surplus of 24,996 million dollars (MMUSD) in its trade balance of crude oil, petroleum products, petrochemicals and natural gas on 2011. This represent an increase of 28% compared with previous year.


Pemex Strategyfor 2012

(Main goals)

6,165.7 MMpcd

2,559.9 Mbd

1,331.3 Mbd

1,175.7 Mbd

1071.4 MMpcd

445.1 Mbd

Natural Gas

Dry gas

Crude Oil

Domestic

International

Petroleum

Products imports

production

imports

Market

Market

production

Scenario 2012

This year Pemex will continue with its optimization program in all its processes and associated services in order to strengthen areas that create value to the company, identifying those areas that require new strategies to perform efficiently its activities.


Scenario 2012

Major resources for investment expenditure segment allow fulfill with maintenance and infrastructure development programs, in order to continue with modernization of the company, while reduction in current expenditure indicates a minor bureaucracy in Pemex operation.

Pemex Budget by Economic Classification, 2012

(pesos & percentage structure)

141,230,386,919,

32%

Current

Expenditure

Investment

Expenditure

301,255,000,000,

68%


Current Expenditure Budget, 2012

70,000,000,000

(Pesos)

60,059,251,227

60,000,000,000

50,000,000,000

40,213,237,592

40,000,000,000

32,856,898,871

30,000,000,000

20,000,000,000

10,000,000,000

7,328,309,969

772,689,260

0

Public Goods

Public Services

Budget support

Support public function

Pensions &

& improving efficiency

& management

retirements

improvement

Scenario 2012

Current Expenditure Budget


Pemex Investment Expenditure Budget, 2012

(Pesos)

301,255,000,000

350,000,000,000

274,132,762,537

300,000,000,000

250,000,000,000

200,000,000,000

150,000,000,000

100,000,000,000

17,407,323,789

3,658,787,248

3,193,598,577

1,846,916,460

785,996,808

213,527,446

50,000,000,000

16,087,135

Breakdown

0

Other

Estate

studies

Acquisition

Social

Programs

Investment

Infrastructure

Expenditure

investments

economic

Hydrocarbons

Other projects

Pre-investment

maintenance

infrastructure

Infrastructure

Scenario 2012

Investment Expenditure Budget


Scenario 2012

Total annual expenditure programmed for Pemex in 2012 amounts to 442,485.4 million pesos, while non-programmed is 34,839.6 million pesos. Pemex Exploration & Production receives 291,075.5 million pesos from programmed expenditure and 34,475.5 million pesos from non-programmed. PEP becomes subsidiary that receives more resources..

Total programmed expenditure, investment expenditure by subsidiary (Million pesos & percentage)


Scenario 2012

Strategic Objectives

  • Based on Business Plan 2012-2016, Pemex Exploration & Production update its strategic objectives for this period as follows:

  • Maintain an average of oil production between 2.6 to 2.9 MMbd

  • Maintain an average of gas production between 5.8 to 6.1 MMMcfd

  • Replace 100% of proven reserves

  • Maintain production costs in the first quartile and optimize discovery and development costs in order to reach first quartile

  • Achieve the goal of zero accidents

  • To be considered as a socially responsible company


PEP, Investment Programs and Projects, 2011-2012

60

(Thousand Million pesos)

52.8

49.5

50

45.8

43.4

39.3

2011

40

2012

30.7

30

20.6

20.7

18.3

18.1

20

13.5

12.7

10

6.5

5.6

0

Cantarell

Gas

Ku-Maloob-

ATG

Burgos

Antonio J.

Jujo-

Strategic

Zaap

Bermúdez

Tecominoacán

Program

Complex

Scenario 2012

Investment Programs & Projects


PEP, Investment Programs & Projects, 2011-2012

(Thousand million pesos)

8.0

7

7.0

6.6

6.1

6.1

5.8

6.0

2010

5.4

4.8

4.9

2011

5.0

4.5

4.2

4.0

3.2

3.0

2.9

2.8

2.8

3.0

2.5

2.0

1.0

0.0

Chuc

Delta del

Yaxche

Caan

Bellota-

Poza Rica

Arenque

El Golpe-

Grijalva

Chinchorro

Puerto Ceiba

Scenario 2012

Investment Programs & Projects


PEP, Investment Program & Projects, 2011-2012

4.0

(Thousand million pesos)

3.4

3.5

3.3

3.0

2011

2.4

2.5

2.3

2012

2.1

1.9

2.0

1.6

1.4

1.5

1.2

1.0

1.1

1.0

0.8

0.7

0.6

0.6

0.5

0.5

0.0

Ek-Balam

Tamaulipas-

Cactus Sitio-

Och-Uech-Kax

Ayin-Alux

Carmito-Artesa

Cárdenas

Lakach

Constituciones

Grande

Scenario 2012

Investment Programs & Projects


Pemex Investments

350,000

350,000

(Billion pesos)

286,338

300,000

268,599

251,882

250,000

198,247

200,000

164,629

143,600

150,000

122,161

116,757

94,123

100,000

67,657

67,471

65,525

50,000

0

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Investments

During current administration, investment budget has increased 100%. In 2011, Cantarell projects, Gas strategic program, Ku-Maloob-Zaap, Aceite Terciario del Golfo, Burgos and Antonio J. Bermúdez exert most of total investment.


Exploration & Production Esteemed Investments

30

(Billion dollars)

25

20

15

10

5

0

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

3

3

3

4

4

5

5

5

5

5

6

6

6

6

6

Exploration

17

18

19

18

19

18

18

18

17

18

17

17

17

17

18

Production

Investments

Long-term investments of Pemex Exploration & Production are focus on maintain crude oil production above 2.5 MMbd, gas extraction above 6,100 MMcfd, and reserve replacement rate exceeding 100%.


Crude Oil Production, 2012-2016

(Thousand barrels per day)

2,821

2,850

2,800

2,731

2,750

2,675

2,700

2,628

2,650

2,606

2,600

2,550

2,500

2,450

2012

2013

2014

2015

2016

Investments

On Business Plan 2012-2016, Pemex forecast a growth rate of 2% regarding crude oil production during period 2012-2016, projection includes implementation of integral contracts for exploration & production.


Crude Oil Exports, 2012-2016

(Thousand barrels daily)

1,314

1,320

1,300

1,271

1,280

1,260

1,252

1,260

1,240

1,221

1,220

1,200

1,180

1,160

2012

2013

2014

2015

2016

Scenario 2011-2016

For period 2012-2016, oil exports will maintain stability, growth rate for reference period is of 1%, coupled with high prices projected, will maintain high income rates in the country.


Mexico: liquid hydrocarbons production scenarios

(million barrels daily)

4.5

Esteemed

Historic

3.6

2.7

Reference

High oil prices

Low oil prices

1.8

High economic growth

Low economic growth

0.9

2006

2007

2008

2009

2010

2011

2015

2020

2025

2030

2035

3.7

3.5

3.2

3.0

2.9

2.8

2.3

1.8

1.4

1.5

1.7

Reference

3.7

3.5

3.2

3.0

2.9

2.8

2.3

1.7

1.4

1.6

1.8

High oil prices

3.7

3.5

3.2

3.0

2.9

2.8

2.4

1.8

1.5

1.6

1.7

Low oil prices

3.7

3.5

3.2

3.0

2.9

2.8

2.4

1.8

1.4

1.5

1.7

High economic growth

3.7

3.5

3.2

3.0

2.9

2.8

2.3

1.8

1.5

1.6

1.8

Low economic growth

Scenario 2012-2035

The Energy Information Administration (EIA) reviewed oil production projections in Mexico according different scenarios; in referent scenario for 2011 forecast a decline annual rate of -2.4% for period 2008-2035, projection for 2010 rate was of -2.9% between 2007-2035.


Strategies

Pemex has outlined the following objectives & strategies

Main initiatives by subsidiaries

  • Increase incorporation of reserves

  • •Maintain production platform (Cantarell)

  • •Development of complex fields in an efficient way (ATG,AP)

  • •Reactivate marginal fields – Incentivated Contracts

  • •Increase and maintain use of gas

Exploration & Production

Refining

  • Increase reliability and profitability of the National Refining System

  • •Deep conversion projects

  • •Meet gas & diesel standards

  • •Increase import capacity and strengthen storage & distribution capacities

Gas & PQB

Increase process and transport capacity, according with growth in primary production and demand

Petrochemical

  • Increase efficiency of profitable chains

  • •Stimulate participation of private sector in new projects development


Strategies

Cross-cutting initiatives

  • Consolidation and continuous improvement of SSPA

  • Sustainability and Environment Protection

Security

emex

  • Operational Reliability

  • Control of fuels illicit market

P

Reliability

de

  • Best practices in Projects development

  • Integral Business Model of supplies

  • Human Resources Strategy

ol

r

Profitability

t

n

and efficiency

o

c

jo

a

  • Strategic Technological Program

  • Suppliers Development

  • Management Processes System

B

Sustainability


Main initiatives

S

e

curity

R

e

s

e

rv

es

Oil production

Reserves

Crudeoil production

Gas Production

Environmental

r

Gas

production

Operative

Protection

reliability

C

hicont

e

p

e

c

Human

Deep

waters

Lo

g

is

t

i

c

Use of gas

resources

M

inat

ilá

n

N

ew

Refin

ery

New Tula Refinery

.

Fuels quality

M

i

natit

l

án

Deep waters

S

a

l

amanca

Structural issues

Fuels quality

Chi

c

ont

e

p

ec

Petroleum logistic

A

l

liances

A

l

liances

Human resources

Energy

Operative reliability

S

a

l

a

m

a

n

c

a

Illicit market

Corporate Governance

Environmental Protection

Energy reform

Corporate governance

Structuralissues:

Fiscal regime

Labor liabilities

a

Subsidies

Citizen bonds emission

Strategies

Prioritized initiatives: importance vs. progress

High

Importance

Illicit market

reform

2008

Medium

-

+

A

dvance

Debt structure diversification


Develop complex fields and reactivate marginal fields

In short-term, Pemex must use different schemes in order to develop internal capacities in

substantive areas

n

(IC)

New schemes proposed are:

Integral contracts

Integral field laboratories

n

(

IL)

Transactional contracts

Low

Medium

High

IC

IC

IL

High

IC

IL

TC

IC

IC

IL

Medium

TC

IL

TC

Complexity

IC

Low

IL

TC

TC

TC

Deep waters

C

h

icon

t

e

p

ec

Mature

s

fields

(

R

e

a

ctivation)

Strategies

(TC

)

Internal capacity

Internal capacity

:

Human resources

T

echnology

P

r

ocess

C

omplexity:

Scale

Technological challenges

Market service


Original volume

R

e

s

er

v

es

3P

Current production

(MM

b

o

e)

(

bd

)

(MM

b

o

e)

1

,

46

5

104

51

46

1

4

0

32

1

Ma

g

a

l

la

n

es

S

a

n

t

u

ar

i

o

Carr

i

z

o

Ma

g

a

l

la

n

es

S

a

n

t

u

ar

i

o

Carr

i

z

o

Rates

U

S$

/

b

)

Sa

n

t

u

a

ri

o

M

a

g

a

ll

a

n

e

s

C

a

rriz

o

M

aximum

7.97

9.78

12.31

Winning bid

5.01

5.01

9.40

20

1

1

2012

I

II

III

IV

I

II

III

IV

Mature Fields

North Region

.

C

hicontepec

Deep

Waters

Strategies

Reactivate marginal fields: Incentivated Contracts

6 fields grouped in 3 blocks

Reserves 3P of 195 MMboe; Average surface: 312 km2.

First round

(2011):

Mature Fields in the South Region

Award: August18, 2011

Next Bid Calls (2012)


  • This report was prepared by:

  • Sergio Rivas F.

  • Office: +52 55 10 56 08 05

  • Mobile: +52 1 55 18 00 14 16

  • Mobile: +52 1 55 59 09 68 15

  • Please feel welcome to contact Sergio Rivas F.

  • (E-mail: [email protected]) for any questions concerning this report.


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