Monday Night Links -- March 25, 2019

Updates

April 5, 2019: no link; from analyst over at twitter today; company estimates PEMEX produced 1.7 million bopd in March, 2019. Note recent production history below. "Current production" said to be 1.8 million bopd so if the 1.7 million bopd is correct, Mexico's oil production is going in the wrong direction.

Original Post

 

 
From oilprice:

• world's second largest oil company (Sinopec) sees huge drop in profit
• Schlumberger won't take new full-oilfield management projects
• Chinese LNG imports drop as winter nears end
• Trump boosts US presence in Taiwan Strait
• Exxon expects demand for high-sulfur oil to drop 25%

Mexico: But this is the big one, something we've been talking about for quite some time. This has to be very, very concerning on so many levels -- not least of which is the US southern "border" -- which is pretty much just a line on the map any more. Mexico scrambles to save its sinking oil company. See "road-to-Mexico." This story is mostly a re-cap of past stories, same subject. As you read this story, remember the current Mexican president's past rhetoric regarding Big Oil, and the policies of his party. Some data points:

• a six-year plan (central planning, Marxism, Soviet Union: all liked multi-year plans); includes:
• monetization of promissory notes worth $1.8 billion;
• a pledge to crackdown on corruption and fuel theft, saving the company$1.7 billion
• tax relief amounting to $4.7 billion to the end of 2024
• goal:
• see investments n PEMEX to increase to $15 billion from $10 billion this year (numbers rounded)
• recent production history
• 2004: 3.4 million bopd
• currently: 1.8 million bopd
• short-term goal: 2.5 million bopd
• proven oil reserves
• 1997: 50 billion bbls
• 2017: 7 billion bbls
• one word: ouch
• to put that in perspective, the most conservative estimates of the Bakken: 50 billion bbls
• challenges:
• private sector uncertainty
• unclear how the relationship between the private sector and a socialist president will unfold
• debt: $106 billion
• PEMEX is the most indebted company in the world
• Bloomberg: tax breaks do not go far enough
• Fitch downgraded PEMEX's debt rating two notches to BBB-
• price of PEMEX bonds with expiration debt of 2027 fell 0.9% to $97.39; an indication that the market is not fully convinced that the tax breaks will prove sufficient 

Wow -- a debt of $106 billion and the "reforms" and tax breaks -- we're talking maybe $10 billion. PEMEX has to hope Saudi gets this right.

But look at this:

• Exxon expects demand for high-sulfur fuel oil to fall 25% (IMO 2020);
• "sour is out; sweet is in"

This is the problem they will talking about next: Mexico has the "wrong" kind of oil -- heavy and sour. The US needs "heavy" oil to balance the light oil for refining but the sulfur is bad news. The "sweet spot" in the graph below is the upper left hand corner: WTI, Bakken, Niobara, Oklahoma sweet, Eagle Ford. Mexico's major oil, Mayan, is high in sulfur.

Link here for this graphic: