Morgan Stanley: Pemex oil output decline to continue until 2020

Pemex’s financial situation will take its toll until 2020, at least when it comes to its production plunge. According to financial advisor Morgan Stanley, the Mexican state-owned oil company’s output will decline by 700,000 bpd, as compared to current values.

According to a report by Morgan Stanley, the lack of technology and funds required to modernize aging fields will be the reason that Pemex production may drop to around 1.6 million bpd by 2020, less than half the extraction volume reached in 2004.

Just last month, the state-run oil company’s output went down by 4.97 percent.

Pemex has had cash flow shortfalls in the last three years, which will double this year to $22 billion, as compared to the $13 billion from 2015.

Pemex’s problem, according to Morgan Stanley, is also related to external elements like the global fall in oil production affecting producing countries, among them Mexico.

“Mexico, once a bigger supplier to the U.S. than Saudi Arabia, Mexico’s weight has waned as the shale boom reduced American imports and the oil crash dealt a blow to hopes of luring billions in foreign investment,” states the financial advisor in its report.

With insufficient liquidity and investment, Pemex will continue to shrink unable to restore production in areas where it lacks the necessary technical knowledge, according to the reports’ considerations.

“Lower oil prices have exposed important shortfalls that will need to be addressed over the coming years,” it highlights.

On the other hand, analysts consider that Pemex’s constant declining oil production also brought to light flaws in the country’s 2014 regulatory reform, putting an end to decades of state monopoly in the search for much-needed foreign investment.

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