The elected president of Venezuela Edmundo González Urrutia had to flee to Spain and is currently in exile in that country after the regime issued an arrest warrant against him for subversion. González Urrutia obtained 67% of the votes in the election day of July 28, against 30% for Nicolás Maduro with 83.5% of the votes verified with published tally sheets, winning in all states (source: resultadosconvzla.com). We reject the arrest warrant, and the fraud intended by the National Electoral Council – CNE of Venezuela, proclaiming Nicolás Maduro as president-elect for a new presidential term and its ratification by the Supreme Court of Justice-TSJ, both without showing the voting minutes or any other support.  EnergiesNet ” Latin America & Caribbean web portal with news and information on Energy, Oil, Gas, Renewables, Engineering, Technology, and Environment.– Contact : Elio Ohep, editor at  EnergiesNet@gmail.com +584142763041-   The elected president of Venezuela Edmundo González Urrutia had to flee to Spain and is currently in exile in that country after the regime issued an arrest warrant against him for subversion. González Urrutia obtained 67% of the votes in the election day of July 28, against 30% for Nicolás Maduro with 83.5% of the votes verified with published tally sheets, winning in all states (source: resultadosconvzla.com). We reject the arrest warrant, and the fraud intended by the National Electoral Council – CNE of Venezuela, proclaiming Nicolás Maduro as president-elect for a new presidential term and its ratification by the Supreme Court of Justice-TSJ, both without showing the voting minutes or any other support.
10/11 Closing Prices  / revised 10/12/2024 21:59 GMT | 10/10 OPEC Basket  $77.23 +$10.23 cents | 10/11 Mexico Basket (MME)  $70.33 –$ 0.18 cents 08/31 Venezuela Basket (Merey)  $62 15   +$1.66 cents  10/11 NYMEX Light Sweet Crude $75.56 -$0.29 cents | 10/11 ICE Brent Sept $79.04 -$0.36 cents | 10/11 Gasoline RBOB NYC Harbor $2.1516 +0.0007 cents | 10/11 Heating oil NY Harbor  $2.3439 -0.070 cents | 10/11 NYMEX Natural Gas $2.632 -0.043% | 10/11 Active U.S. Rig Count (Oil & Gas)  586 +1 | 10/11 USD/MXN Mexican Peso 19.2802 (data live) 10/11 EUR/USD  1.0937 (data live) | 10/14 US/Bs. (Bolivar)  $37.88570000 (data BCV) | Source: WTRG/MSN/Bloomberg/MarketWatch

Pemex Deepwater Gas Project Lakach Challenging and Difficult to Develop – Experts

Mexico trying to reactivate projec, t looking to reduce dependency on US gas. Observers warn of restrictive business model

Lakach was estimated in 2013 to hold 1.3 trillion cubic feet (tcf) of 3P gas reserves with still significant upsides to be tested.. Lakach is ranking as the fourth largest gas discovery in Mexico. (2B1st Consulting)

Skeky Espejo, Platts S&P Global

MEXICO CITY
EnergiesNet.com 09 04 2024

Mexico is trying to reactivate a costly deepwater natural gas project it abandoned in hopes of cutting the country’s dependence on imported gas and to recoup some of its original investment.

But critics question the decision, warning the project’s high complexity could end up being another source of financial losses for the country’s already indebted oil and gas company.

Pemex is trying to develop Lakach, a non-associated natural gas project located 63 km from the shores of Veracruz in the deepwater Gulf of Mexico, which Pemex discovered in 2007 and abandoned in 2016 after spending $1.4 billion. According to its development plan, approved by the National Hydrocarbons Commission, on Aug. 22, Pemex hopes to recover little under 1Tcf by 2041 and generate a net present value of roughly $500 million before taxes from the project.

To do so, it has signed a deal with a subsidiary of Grupo Carso, owned by Mexican billionaire Carlos Slim, which has said it will spend $1.8 billion developing the project. In 2022, Pemex had signed an agreement with New Fortress Energy of the US to develop Lakach, but the deal went sour soon after it was announced. Companies did not mention the reasons for the cancellation.

Many concerns

Observers and experts note that the project has many challenges.

The first thing to note is that Lakach is in deep waters, where Pemex has had very poor results and where Carso has no experience, said Pedro Martinez , senior analyst of above-ground risk at S&P Global Commodity Insights. Instead of going to Lakach, Pemex could opt to exploit any of the many other gas fields it has, he said.

Pemex has vast onshore gas fields and part of its current output actually comes from onshore gas fields like Quesqui, data from CNH shows. Mexico has roughly 80 Tcf of conventional gas reserves and 141 Tcf of unconventional gas reserves, the data shows.

“If it were onshore, it might be more interesting, but the fact that it is offshore where there is no infrastructure makes it difficult,” Martinez said.

David Rosales, director at consultancy Elevation Ideas in Mexico City, said that developing gas offshore seems puzzling as margins are “too tight.”

“In principle, any effort to reduce the local production of gas is good, but why this one in particular is not clear,” Rosales said, adding that Mexico needs a long-term plan for its natural gas industry.

Both Martinez and Rosales said they would not be surprised if Carso cancelled the deal after a more serious analysis, just like New Fortress did.

Pemex and Carso declined to comment.

Too small

A second issue is the size of the project.

“There are actually few stand-alone gas projects in the world, and the ones there are, are much larger, even as large as 10Tcf in reserves, Martinez said. “Lakach is less than 1Tcf, so when you analyze the economics, you realize that prices do not cover the costs,” he said.

Rodrigo Rosas, senior gas analyst at consultancy WoodMcKenzie said that the size of the project makes the decision difficult to comprehend.

“If Mexico were to reduce its dependency on US gas by half, I would understand it. But if we are going to go from 80% dependency to 78% dependency, then it does not make any sense,” Rosas said.

At peak, Pemex expects to produce 200 MMcf/d of gas from Lakach. On Sep. 3, Mexico had a total natural gas consumption of 9.47Bcf/d, of which 6.3 Bcf/d were used to power the country. Local production was 2.2 Bcf/d. Total imports by pipeline were 6.8Bcf/d, data compiled by Commodity Insights shows. Commodity Insights expects pipeline imports to increase by 5 Bcf/d through 2050 to 11.1 Bcf/d.

Rosas said that there would be ways to increase the size of the project if it were developed as a cluster with other fields located in the area, namely Kunah and Piklis, but noted that those still require exploration. According to CNH data, Piklis is located 30 km from Lakach and Kunah is 33 miles from Piklis.

Questionable business model

Finally, experts questioned the business model that Pemex has chosen for Lakach.

According to CNH, the model that Pemex had analyzed with New Fortress implied liquifying the gas offshore and exporting it. That idea has now been scraped, and Pemex has decided to instead transport the gas onshore and use it for the domestic market.

“It would have been more economical to liquify the gas and send it to a market where prices are higher than using it domestically where it competes with the gas from Texas,” Rosas said. According to his analysis, Pemex would need to sell the gas from Lakach for at least $8/MMbtu to break even, which is almost three times the price Mexico gets from the US via pipeline. Both Martinez and Rosas agree that Pemex will need to subsidize the gas for the local market.

Experts also note that Pemex has chosen to use a service contract to develop Lakach, instead of a farm-out, which offers no guarantees of production.

Miriam Grunstein, chief energy counsel at Brilliant Energy Consulting said recently during an energy forum organized in Mexico City that López Obrador has been following the same business model that Mexican politicians used in the 1990s, in which there was no transparency and the investment opportunities were reserved for a handful of businessmen close to the administration.

Risk of more losses

“The problem is that in this model the risk is all for Pemex. The costs can go to the roof now that the oil bonanza is gone,” Grunstein said.

All observers agree that the biggest risk is that Pemex decides to go on with the project at a loss.

While Mexico has access to the cheapest gas in the world, gas from deepwater could be the most expensive in the world, Grunstein said. “Natural gas from deepwater was not good news 12 years ago, it is not good news today,” she said.

spglobal 09 03 2024

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