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Possible energy policy change in Mexico for E&P: Talanza

policy change in Mexico

Despite the suspension of new bidding rounds in Mexico for hydrocarbons, the publication of the second five-year plan for Exploration and Production (E&P) by the mexican Ministry of Energy (Sener), raises suspicions about a possible policy change, according to consulting firm Talanza.

Published in October 28, the new plan (PQ 2020) has substantial differences from its predecessor (PQ 2019), and it represents a completely new plan since president López Obrador took office in 2018.

Main differences concentrate on the absence of unconventional areas, in tone with the presidential ban, but an increase in offshore potential. For Talanza, “the publication of this document raises suspicions about a possible policy change in Mexico.”

Although it may be “the outcome of a legal requirement”, the new possibilities that PQ 2020 opens are sufficient to take it on notice. Talanza, at the same time, published a paper reviewing how PQ 2020 could increase the production of private operatives by 260,000 barrels per day by 2024.

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Mexico increases offshore block sizes

As in the new paper there’s an increase of 138% in deep-water block size, and 26% in shallow-water block size of biddable areas. In raw numbers, in 2019’s plan there were just 973 km2 of deep-water areas, vs 2,320 km2 in 2020’s plan.

Shallow water areas had 401 km2 in 2019, vs 505 km2 in 2020. “In the same way, PQ 2020 has an important increase in prospective resources for the average block of 257% for deep-water; and 44% for shallow water,” Talanza’s report underlines.

Source: Talanza

This brings new hopes about the possibility of new biddings coming in the future, based on the fact that Sener worked in a completely new plan for E&P, and not just in an extension of the prior one.

The increase in block sizes of offshore areas, for Talanza, recognizes the fact that relaunching new rounds in Mexico is conditioned to private operator’s cooperation. Furthermore “PQ 2020 indicates that Sener will annually evaluate the tangible benefits of E&P contracts; thus, it is key to focusing on production, reserves incorporation, exploratory activity, and investments,” the report concludes.

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