Amid Weak Oil Prices, Pemex Touts Its Rock-Bottom Production Costs
January 12 2016 - 8:23PM
Dow Jones News
By Laurence Iliff
MEXICO CITY--With oil prices sinking to levels not seen in more
than a decade, Mexican national oil company PetrĂ³leos Mexicanos
said Tuesday that its production costs are among the lowest in the
world, averaging under $10 per barrel among currently producing
fields and less than $7 a barrel for its cheapest fields.
Furthermore, Pemex said its production costs are actually
falling because of the recent devaluation of the peso, since oil is
sold in dollars and service contracts and other costs are paid in
pesos. "This cost level means that Pemex production activities
continue to be profitable even with the recent fall in hydrocarbon
prices," the company said in a statement.
U.S. oil prices were about $30 a barrel on Tuesday, while Pemex
said that the average price for its basket of mostly heavy export
oils was $21.50 a barrel.
Pemex said that its production costs were lower than
counterparts like Exxon Mobil, Chevron, BP and Brazil's Petrobras,
citing company reports filed with the U.S. Securities and Exchange
Commission.
Pemex said that media reports putting its cost-per-barrel at $23
had included a series of future costs in that calculation, such as
exploration, drilling, new infrastructure and production in new
fields. Those costs are likely to be reduced in the current price
climate, the company said, since service providers must lower their
prices to Pemex to keep their contracts.
Mexico's two-year-old oil reform, opening up the sector to
private and foreign companies for the first time in eight decades,
also allows Pemex to open new lines of business across the value
chain that will benefit the bottom line, the company said.
Pemex reported an after-tax loss of $9.5 billion in the
third-quarter of last year and is shaving billions of dollars from
its yearly budgets on orders from the federal government. The
company's oil production has also fallen every year since 2004 with
no recovery in sight, and it needs to borrow billions of dollar a
year in order to pay its tax bill and make needed investments.
A key reason that legislators approved the controversial 2013
constitutional amendment allowing foreign participation in the oil
sector was because of Pemex's inability to develop more complicated
oil fields in deep waters offshore and in nonconventional
resources. The government needs oil production to stay relatively
high in order to meet its budget needs.
Write to Laurence Iliff at laurence.iliff@wsj.com
(END) Dow Jones Newswires
January 12, 2016 20:08 ET (01:08 GMT)
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