Mexico's state oil firm Pemex has begun to revive its fortunes after successive losses in recent years, mainly due to falling oil and natural gas production and the drop in crude prices.
The company's oil production has been in steady decline over the last 13 years, hitting a year low of 2.3Mb/d in April. In June however, energy minister Pedro Joaquín Coldwell said the country is aiming to raise oil production to 3.4Mb/d in the medium term.
Pemex's performance has also been impacted by three consecutive cuts to its annual budget, which is determined by the finance ministry and put to vote in congress, impeding investment in infrastructure and exploration. The company suffered a budget cut in 2015 of US$4.16bn, a US$5.22bn cut to in 2016 and a further US$5.2bn reduction this year.
The plan envisages saving 35bn pesos (US$1.92bn) via austerity measures, including laying off workers. The company laid off around 10% of its workforce in 2015, and more redundancies are planned, with around 2,785 workers from various areas of its exploration and production division PEP set to lose their jobs.
Pemex reported a profit of 88bn pesos for Q1, after posting its first earnings in many quarters in the previous three months.
The NOC exercised a monopoly over oil and gas production from 1938 until 2014, when the energy reform threw open the sector to private participation, and set the stage for the country's first hydrocarbons auctions, five of which have been held to date. The next one - for onshore fields - is scheduled for July 12 and will be the second of Round Two, with a deepwater auction scheduled for December 5.
Most of Mexico's hydrocarbons reserves lie in deep water, an area in which Pemex has no previous experience, and the company has forged alliances to exploit such resources after choosing partners auction. The first, signed in March with BHP Billiton, will develop the Trión block, which was discovered by Pemex in 2012 and has total 3P reserves of 485Mboe. Its development will require US$11bn in investment and the first oil is expected in six or seven years, with production of more than 100,000b/d of crude oil or equivalent.
As part of its strategy announced in June, Pemex plans to accelerate farm-outs and strategic associations to increase crude oil and petrochemical production, increase reserves and access new technology, ambitions that now look more achievable in the light of the company's recent performance.