First oil

It’s been a while since some positive news has come out of Mexico’s E&P sector, so an announcement by state firm Pemex of a giant discovery was quite welcome. After initial news leaked out on March 15, Pemex on March 18 confirmed that a 1.2-Bboe discovery of oil and gas had been made in a three-reservoir complex, onshore Tabasco state.

Pemex CEO Octavio Romero Oropeza first broke the news on March 15, comparing it to the recently discovered gas/condensate fields, Quesqui (900 MMboe) and Ixachi (1.9 Bboe).

This new find, said Romero Oropeza on March 18, is the third in the administration of President Andres Manuel Lopez Obrador (AMLO). The complex has been named Francisco J Mugica, and the three main reservoirs are referred to as Dzmipona, Valeriana and Racemona.

In addition, Romero Oropeza said the complex should produce 289,000 bopd and 1 Bcfgd through 33 wells by as early as the end of 2021. During 2023, Pemex expects oil production from there to rise to 323,000 bpd. Accordingly, total Pemex oil output could reach 2 MMbpd at the end of 2021. Before this latest find, analysts had expected production to remain at around 1.7 MMbopd to 1.75 MMbopd for 2021 and 2022. “Mexico will increase its gas production and start generating 60% of the gas it consumes by 2023,” added Romero Oropeza, who predicts that Mexico will produce 4.287 Bcfgd by 2023.

The giant find could not come at a better time for Mexico and Pemex. The state firm is under pressure to prove that it is increasing production under AMLO, who steamrolled into power in late 2018, promising to revive output and roll back previous energy reforms.

Biden’s half-truths on carbon emissions. On Feb. 26, the Biden administration announced that, for at least the rest of 2021, federal agencies will conduct regulatory and environmental analyses, assuming that the global “social cost” of emitting carbon dioxide is $51 per ton. Called the “Social Cost of Carbon” for short, this calculation is directed primarily toward agriculture and fossil fuels. This also appears to be another case where “Joltin’ Joe” Biden (apologies to the late Joe Dimaggio) should have had two cups of coffee to “jolt” his mental acuity before making this terribly flawed decision.

You see, says Poe Legette, partner in the Houston and Denver offices of law firm BakerHostetler, this announcement “creates the climate policy conundrum of 2021.” According to Legette, the Biden team’s announcement contains a technical paper that “explains” the assumptions and uncertainties. “It also makes clear,” noted Legette, that “the $51 value does not consider the social benefit of consuming oil and gas.” In contrast, he explains, “with similar assumptions and uncertainties, and just for the sake of illustration, a highly simplified value of that benefit can be calculated in dollars per ton. The global ‘social benefit of carbon’ is $5 million per ton.”

Well, that is some kind of whopping difference. This calculation is the author’s, not that of the 21 states suing President Biden. And why are 21 states suing Biden? The answer is that attorneys general from those states on March 18 sued to overturn Biden’s cancellation of the Keystone XL pipeline through Executive Order.

The difference between the Biden team’s cost calculation and Legette’s benefit calculation shows that “ignoring benefits when quantifying costs might skew decision-making,” said Legette. Imagine that—the Biden team playing loose with the truth. And, he adds, “the failure of the social cost of carbon to consider the benefits is what lies at the heart of the 21 states’ suit, Missouri v. Biden, No. 4:21-cv-00287-SPM.” The states claim that, by design, the social cost of carbon skews the analysis to justify increased federal authority over areas of regulation traditionally left to the states. Their suit challenges three distinct planks of Biden’s Executive Order. Here’s hoping that the states are successful in overturning it.

About the Authors

Kurt Abraham

World Oil

Kurt Abraham kurt.abraham@worldoil.com