Mexico rejects Pemex oil reserve estimate

Mexican regulators rejected a huge chunk of state oil monopoly Pemex’s estimate of how much oil and gas the country has, calling into question the long-term sustainability of the industry.

The National Hydrocarbons Commission ordered Pemex to produce more evidence to back up its claims of probable and possible oil and gas reserves in its northern region, in a ruling dated Sept. 30 but published on its website on Friday

The commission, known by its Spanish acronym CNH, cited wide differences between what Pemex said it could recover from the area and studies by independent reserves auditors.

Pemex estimated in March that the possible and probable reserves in the northern region, mainly at the controversial Chicontepec project, were more than 17 billion barrels of oil equivalent, more than 40 percent of the country’s total.

At the time Pemex executives admitted its auditors had questioned the reserves estimate but said they expected to demonstrate that enhanced production methods, like injecting water into the fields, would support its higher estimate.

Chicontepec has sucked in billions of dollars of investment in recent years as Pemex has struggled to unlock the challenging geological formation that holds billions of barrels of oil in tiny pockets, making production slow and costly.

The CNH has sharply criticized the project this year, claiming it was unprofitable, a charge rejected by Pemex.

Industry sources told Reuters in April that Pemex’s auditors urged the company to reduce its estimate of probable and possible reserves at Chicontepec by nearly half, which would chop the country’s total reserves by 17 percent.

The ruling does not affect Pemex’s estimate of its proven oil reserves.

Reuters