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Mexico May Extend Oil Output Declines for 7th Year
email this pageprint this pageemail usCarlos Manuel Rodriguez - Bloomberg
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December 10, 2010



Petroleos Mexicanos, the state-owned oil company, is likely to post a seventh straight year of output declines in 2011 after the company faced delays to attract private investment for exploration projects.

Output will likely average 2.55 million barrels a day next year, down from 2.58 million in 2010, Mexican Energy Minister Georgina Kessel said today in an interview. “From there on, we’ll continue to increase, very gradually, our production,” said Kessel, who is also chairwoman of the state-owned company.

Chief Executive Officer Juan Jose Suarez Coppel had been seeking Pemex’s first production gains since 2004 as he stabilized output at the company’s Cantarell field and brought online new projects. The company is counting on new performance- based contracts with foreign operators to help boost output. These faced delays in being approved by the company’s board.

State-owned Pemex plans to hire companies to maximize reserves in older fields and also explore in deep waters in the Gulf of Mexico, where it estimates it may have 30 billion barrels of oil. Kessel said that contracts for deep water projects may be offered at the end of 2011 or early 2012.

Pemex is targeting companies such as Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc. The Mexico City-based company has been preparing the performance-based accords since Mexico revised its oil laws in 2008 to allow the hiring of foreign companies. Mexico’s Supreme Court upheld those plans this week after they were challenged by some lawmakers.

Betting on Contracts

Pemex “was betting in the implementation of the new contracts to revert the falling production,” Alejandra Leon, an analyst with Cambridge Energy Research Associates, or CERA, in Mexico City, said today in a telephone interview. She estimates Pemex won’t be able to stop output declines before 2018.

Pemex published preliminary contract conditions last month to develop three mature fields. Final auction rules will be published in February, the company said.

“Those contracts are too small for the needs of a company such as Pemex,” David Shields, a Mexico City-based energy analyst who has written two books about Pemex, said today. “I don’t see how they can increase output.”

In about a year, the Mexican oil producer may produce about 2.6 million barrels a day and start reverting the trend, Kessel said. “We’re about to start seeing the results from the increased investments in the sector,” she said.

Editors: Dale Crofts, Carlos Caminada

To contact the reporter on this story: Carlos M. Rodriguez in Cancun at carlosmr(at)bloomberg.net

To contact the editor responsible for this story: Dale Crofts at dcrofts(at)bloomberg.net





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