Slow well re-connection curbs optimism over Mexico oil output recovery -sources

FILE PHOTO: Pemex Chief Executive Officer Octavio Romero attends a news conference in Mexico City
FILE PHOTO: Pemex Chief Executive Officer Octavio Romero gestures in a news conference after Sunday's fire on an offshore platform in the southern Gulf of Mexico, at the headquarters of state-owned oil giant in Mexico City, Mexico, August 23, 2021. REUTERS/Edgard Garrido/File Photo

August 26, 2021

By Ana Isabel Martinez, Marianna Parraga and Stefanie Eschenbacher

MEXICO CITY/HOUSTON (Reuters) – State-run Petroleos Mexicanos’ efforts to restore oil production at an offshore cluster hit by a fatal weekend fire could lag official projections, people close to the matter said, as re-connecting wells is proving more difficult than planned.

About a quarter of Mexico’s oil output was halted by the accident that took over 400,000 barrels per day (bpd) offline at the country’s largest production hub, Ku-Maloob-Zaap (KMZ). Seven workers were killed and six injured in the blaze, which was extinguished over the weekend.

Pemex is working to re-establish power and re-connecting up to 125 wells in a recovery plan that calls for all output to be fully online by Aug. 30, Chief Executive Octavio Romero Oropeza said this week.

Pemex has not yet estimated the monthly impact of the fire on its crude exports.

But four people close to the recovery efforts said Romero’s forecast looks too optimistic as key technical issues, including controlling the wells’ pressure, re-establishing all the pumping systems and replacing burnt infrastructure, have not yet been completed.

Pemex has the know-how to restore output and can exhaust inventories in the coming days to fulfill exports commitments. But because the gas re-injection infrastructure was hit by the fire, there will be a limit on what it can progress before replacing equipment, one of the sources said.

Pemex did not immediately reply to a request for comment.

“It is a real mystery,” a Pemex source said about how the company could quickly restore output after major damage to the offshore oil platform and an associate gas distribution hub.

Photos of the burnt infrastructure distributed this week through social media showed blackened towers, pipelines and wires at the E-Ku-A2 in the Bay of Campeche, in the Gulf of Mexico.

Pemex produced some 1.7 million barrels per day (bpd) of crude in July, of which 742,000 bpd came from KMZ. Output remains limited due to lack of natural gas for re-injecting to the cluster’s oilfields.

By Tuesday, the company had recovered 71,000 bpd of production after re-plugging 35 wells, and another 110,000 bpd were expected to be added this week, Romero said.

“About 70% to 80% of the lost barrels could be online soon, but fully recovering output will be complex,” a company source said. “We’re talking about mature fields and the experience shows how difficult it is to return to normal.”

KMZ reached a production peak of 875,000 bpd in 2018, almost half of Pemex’s total oil output in the country. The cluster was producing about 720,000 bpd of crude before the accident.

(Reporting by Ana Isabel Martinez, Stefanie Eschenbacher and Adriana Barrera in Mexico City, and Marianna Parraga in Houston; editing by Gary McWilliams and Marguerita Choy)