Mexico expected to slash crude exports as output hits lowest in 45 years

Houston/Mexico City — Mexico’s state energy company, Pemex, is planning to cut at least 330,000 barrels per day (bpd) of crude exports in May, leaving customers in the US, Europe and Asia with a third less supply, two sources say.

The plan follows the withdrawal of 436,000 bpd of Maya, Isthmus and Olmeca crudes this month, ordered by Pemex to its trading arm PMI Comercio Internacional because it needs to supply more to its domestic refineries as it targets energy self-sufficiency.

Pemex has no option other than applying monthly cuts to exports after its crude production in February fell to the lowest level in 45 years and the country’s refineries, including a new facility in the port of Dos Bocas, began taking in more crude oil.

Dos Bocas alone is expected to need an average of about 179,000 bpd of crude this year, according to official figures.

Neither Pemex nor its trading arm responded to a request for comment.

Offshore platform fire

Over the weekend, a deadly fire at an offshore platform in the Gulf of Mexico also meant Pemex had to halt production at several wells, one of the sources said. It is not clear how many barrels would be cut as a result.

Pemex exported 1.03-million bpd of crude last year, and 945,000 bpd in January-February.

Mexico’s energy ministry expects domestic processing to increase to an average of 1.04-million bpd this year from 713,300 bpd in 2023, leaving fewer barrels available for exports in the remainder of the year.

“May cuts are expected to be between 10-million and 14-million barrels (in total),” another source said.

Even though the cuts were significant and expected to be applied on a monthly basis from April onward, Pemex’s trading arm had not declared force majeure over supply contracts, the sources, who are traders, said.

Most of the contracts include provisions to allocate monthly volumes of specific crudes depending on availability, the sources added. The volumes are agreed mid-month.

Pemex and the government of President Andres Manuel Lopez Obrador said earlier this year that the Dos Bocas refinery, in Mexico’s Tabasco state, would start producing petrol and diesel in the first quarter.

While the refinery has begun processing crude in recent months, it has yet to contribute to the domestic market with finished motor fuels.

Apart from the increased local demand, dwindling reserves — especially at old Gulf of Mexico fields — was another challenge, a separate source, at the energy ministry, said.

There had been “discrepancies” in Mexico’s data on reserves, the source said, adding that these currently overestimated both the amount of crude oil Pemex could technically recover at a cost that was financially feasible, and the quality of the crude oil itself.

“The prognosis for the future is not encouraging,” the source said. “The production decline is unavoidable.”

Reuters