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Pemex: What to Watch for in 2016

Some of the 153,000 employees of Mexico’s state petroleum interest will be looking for new jobs in 2016. Hoping to closer match up with some of the international firms now competing to profit from remaining Mexican oil resources, Pemex announced in December that job cuts in 2016 would be a part of the ongoing changes at all levels of the petroleum stream. Pemex has also been partnering with private companies and opening bidding on exploration, and construction projects to firms beyond the nation’s borders.

Falling international oil prices have left the petroleum monopoly with the lowest budget it’s had since 2007 and the process of “farming out” more contracts is well under way. 2016 will see the first ground-breakings on many of these projects.

Production of the company’s premier product is also expected to the lowest in a quarter century as Pemex continues to struggle to re-organize in the wake of accidents, lower yields on existing wells, and as already mentioned, a glut in global supply that’s left prices hovering below US$40 a barrel.

One of the biggest downstream contracts awarded went to the engineering unit at South Korean firm, Samsung Group. Their US$550m contract is for extensive engineering for the second phase of the Antonio M. Amor Refinery in Salamanca, Mexico. This is also one of the most closely watched of the private contracts being awarded, in part because refineries history and stature. The contract calls for an expansion of the plant capacity by some 53,000 barrels and it’s to be completed by the end of 2018. Samsung also completed the first phase of the project which was awarded in 2014.

Finally, after increasing interest in Mexico’s deep-water oil-field auctions, a fourth auction has been announced for ten more deep sea oil fields. This auction follows three previous auctions that stumbled out of the gate in 2015, but which picked up in interest and terms before the end of the year. But importantly, these contracts are under a license contract model something like a concession model.

The ten fields are very near to the US maritime boundary where Royal Dutch Shell is already operating a project in partnership with Chevron and BP. Oil or gas discovered in the Mexico side of the Perdido Fold in the Gulf of Mexico would still fall under the auspices of the Mexican regulators.

Pemex is expected to continue making major changes as it struggles to get back on its feet, after the worst fiscal year in the company’s history. To do that, it’s relying on partnerships, both domestic and international at all levels of the petroleum production stream.

Another important aspect of protecting a national oil industry for some 70+ years is that very few foreign engineers are familiar enough with the country’s technical and official standards for engineering and normas de referencia. This particular problem is easily remedied though as most Mexican standards and technical documents are translated and available for download online.

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