MEXICO CITY—Mexico’s state-run oil company is postponing some deep-water exploration projects in response to a steep drop in global crude prices, the company’s director said February 18.
Emilio Lozoya, head of Petroleos Mexicanos, or Pemex, also said there will be personnel cutbacks at the company, with details to be made known in the coming weeks.
“There are concrete projects for exploration in some deposits in deep water, not in all of them, but those at greatest risk … if we have not started, they will be postponed,” Lozoya said in comments to local radio.
The announcement was the latest bad news for Mexico’s oil sector, which has been hit by crude prices’ slide to a near-six-year low in January, even as the country embarks on ambitious energy reforms that aim to modernize the industry by allowing private investment for the first time in decades.
From a high of more than $100 a barrel, the value of Mexican export crude sank below $40 earlier this year. On Tuesday it was trading at $50.57 a barrel, about $25 below the level where analysts say the country’s unconventional exploration and development projects can be profitable.
Pemex announced this week that it would slash 2015 expenditures by a little over $4.2 billion, part of a broader federal government cutback of $8.4 from its own annual budget.
Mexico has opened up bidding on what it calls Round 1 of projects open to investment by outside companies, and Lozoya reiterated Wednesday that it will go ahead this year as planned.
Authorities say more than two dozen companies including giants such as Exxon Mobil and Chevron have expressed interest in 14 shallow-water blocks available in Round 1.
The cost of extracting oil from shallow-water deposits in the Gulf of Mexico is estimated at about $20 a barrel, making such projects profitable even at current price levels.