Pemex To The Rescue?

Mexico Looks to Play Catchup with Deepwater Oil Exploration

"While the U.S. has spent two decades scouring the deep waters of the Gulf of Mexico for oil, neighboring Mexico is just getting started.

Output from Mexico's traditional fields is in free fall, forcing state-run Petroleos Mexicanos to move into more difficult terrain in an effort to maintain its status as a major crude exporter.
Pemex is paying the price for the late start. It expects to see its first barrels from fields in waters deeper than 1,640 feet in 2015. By 2017 the company forecasts 92,000 barrels a day in deepwater output, a fraction of total production and not enough to offset the 500,000-barrel-a day decline it expects to see at the giant Cantarell oil field over the next nine years."

"This week Pemex said it plans to drill 27 wells in waters deeper than 1,640 feet from 2008 through 2012, compared with six from 2004 through 2007. Pemex planned to drill three last year but hasn't released any results.

Pemex Chief Executive Jesus Reyes Heroles said the company's exploration campaign could benefit from the downturn in oil prices. There was a huge backlog for deepwater platforms when Pemex placed its orders because record oil prices drove a boom in offshore oil development. Now some oil companies are slashing offshore budgets owing to the oil price drop and tight credit markets, and some platforms could free up."

"Pemex says it has 53.8 billion barrels of potential oil reserves, of which 54.8% are in waters deeper than 1,640 feet."

The move into deep water exploration is not a choice for Pemex, it is mandated by it's rapidly declining production and by it's reserve profile. The long term fundamentals for deep water drillers remain strong as it becomes more and more clear that the deep water ocean floor has the most potential for significant oil discoveries.