Pemex announces on October 9 discovery of offshore fields in Gulf of Mexico
On October 9 the state-owned Pemex announced the discovery of seven fields distributed in two basins in the Gulf of Mexico. Pemex reportedly expects to produce between 30 and 45 thousand barrels per day from the said basins, which will purportedly yield 180 million barrels. In turn, the state-owned company announced that between 2019 and 2020 it will initiate production in the Xikin and Esah fields discovered in 2015, whose potential is estimated at 350 million barrels. Additionally, the company announced it would request more funds to carry out further exploration operations. Reports did not specify whether other corporations in the energy sector would directly take part in exploiting the said fields.
While Mexico stands to benefit from the discovery of the new basins and the subsequent expansion of offshore drilling operations, the Mexican economy is unlikely to experience an immediate boost. For instance, although the Gross Domestic Product (GDP) is expected to grow 2.2% in 2018, fiscal deficit is expected to reach 2.9% in relation to the GDP. Considering pledges of incoming President Manuel López Obrador (AMLO) to heavily invest in the public sector, state expenditures are expected to increase in 2019. Although ALMO has committed to further develop the oil industry, his pledges to halt or limit crude exports to prioritize internal consumption could potentially undermine foreign investment in the energy sector. Furthermore, adverse weather conditions underscore the Gulf of Mexico remains vulnerable to production freezes caused by seasonal hurricanes and storms, as recently witnessed following the passing of Hurricane Michael between October 7-12, which paralyzed 40% of oil and 30% of natural gas production. That said, in the short-term Mexico could likely benefit from surging oil prices in the global market due to expected lower outputs from Iran. However, it is uncertain whether this trend will consolidate moving forward into 2019.