PETROLEUM CAPITAL AND OPERATING COSTS: WHAT CAN
PROSPECTIVE INVESTORS EXPECT FOR MEXICO?
WEEKLY ITEM OF INTEREST: APRIL 23, 2015
TABLE 1:
from GERRY ANGEVINE , ENERGY ECONOMICS SPECIALIST AND ADVISOR
CAPITAL & OPERATING COSTS PER BOE, RECENT HISTORY
3-YEAR AVERAGES (FY2011-2013), US$/BOE
FINDING &
DEVELOPMENT
COST
PRODUCTION
OPERATING
COST
TOTAL
‘COST OF SUPPLY’
PEMEX
12.55
7.53
20.08
Repsol, SA
8.24
15.27
23.51
EOG Resources Inc.
24.18
1.96
26.14
BP plc
20.21
6.51
26.72
Ecopetrol
19.95
16.89
36.84
YPF SA
17.83
25.12
42.95
Occidental Petroleum
32.63
16.21
48.84
Apache Corp
34.96
12.87
47.83
Petrobas
24.29
33.04
57.33
Total PEMEX and all companies
re Central & South America Only
17.75
17.04
34.79
US Only
22.55
14.68
37.23
World
20.13
18.94
39.07
COMPANY
PEMEX and selected companies
re Central & South America Only
DATA SOURCE: Ernst & Young Global Oil and Gas Reserves Study, 2014
TABLE 2:
www.alconsult.net/mexico
COST SUMMARIES FROM 22 CNH OPINIONS REGARDING
RECENT PEMEX PROJECT DEVELOPMENT PROPOSALS, US$/BOE
FINDING &
DEVELOPMENT
COST 1
PRODUCTION
OPERATING
COST
TOTAL
’COST OF SUPPLY’
10 Onshore Projects
8.45
8.79
17.24
12 Offshore Projects
12.09
4.23
16.32
All Projects
10.43
6.41
16.84
COMPANY
2, 3
1: Includes go-forward costs only, generally not full cycle. Since discovery has mostly occurred, the finding portion is not included.
2: 18 of 22 projects are in the Sureste Basin in southeast Mexico.
3: Tampico-Misantla and Burgos onshore projects are not represented in the data.
“As indicated by Table 1, the sum of
PEMEX’s finding and development costs
(FDC) and production operating costs per
barrel of oil equivalent (BOE) is lower than
for a significant number of companies
operating in Central and South America.
They are also less than 60 percent of the
average of these costs recorded in the
United States alone, and nearly half the
World average.
These costs pertain to companies’ combined
oil and gas exploration, development and
production activities, both onshore and
offshore and, therefore, do not provide
insight with respect to particular types of
pools or exploration plays. Examination of
opinions (“dictamens”) issued by Mexico’s
Comision Nacional de Hidrocarburos
(CNH) for 22 projects proposed by PEMEX
in recent years (mostly in Sureste Basin)
confirms the indication from the Ernst
& Young Reserves Study that PEMEX’s
capital and operating costs have been
comparatively low (Table 2). Further, it
indicates that, as one might expect, FDC
costs are greater in the case of offshore
pools than for onshore pools, while offshore
pools generally have lower production
operating costs on a per BOE basis.
Profit-driven private companies will very
likely be more efficient, yet lower costs
than PEMEX has been able to achieve may
be beyond reach. For one thing, foreign
companies may have to incur greater
costs than PEMEX for onshore projects
because of security concerns. Second,
much of the development that has already
occurred has been in relatively low cost
onshore and offshore regions. Further, with
numerous companies involved in Mexico’s
upstream petroleum sector, rather than
PEMEX alone, there is likely to be upward
pressure on drilling and service sector
costs. In addition, in many situations
the need for new transportation, storage
and processing infrastructure will require
significant development expenditures.”
PLEASE CONTACT ME TO DISCUSS
OPPORTUNITIES IN MEXICO
gangevine@alconsult.net, +1.403.703.4968
Find more information online at:
www.alconsult.net/mexico