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 Business News | March 2008 
Mexico's Pemex to Raise 2008 Spending by 28%
 Catherine Bremer - Reuters
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Mexico City Mexican state-run oil monopoly Pemex expects to raise spending by a hefty 28 percent this year to around $20 billion, with the bulk going toward exploration and production.
Finance Director Esteban Levin told an investor conference call Friday that 84 percent of the 2008 investment budget would be spent on exploration and production, where Pemex is suffering declining oil output and reserves.
He said 11 percent would be spent on refining, after Pemex was hurt last year by soaring fuel import costs due to a lack of refining capacity. Mexico imports some 40 percent of its gasoline.
Two successive conservative governments have raised Pemex's spending since the end of decades of one-party rule in Mexico in 2000, lifting it from just a few billion dollars annually to a record $16 billion in 2007.
The 2008 investment figure has been agreed by Congress but could be added to later in the year.
Pemex, also helped by recent cuts to its lofty tax bill, is battling to make up for years of under-investment after it was run for decades as a cash cow that provided well over a third of the government's fiscal income.
The company posted a $1.48 billion net loss in 2007, as high fuel import costs and a rise in exploration and production costs offset revenue gains from higher oil prices and knocked it back into the red after a rare annual profit in 2006.
Mexico is a top supplier of crude to the United States, but with reserves waning, Pemex needs to pour billions of dollars into exploration of deep waters in the Gulf of Mexico, where seismic tests suggest there could be tens of billions of barrels of crude.
Only $300 million of Pemex's 2008 investment budget is earmarked for deepwater projects, Levin said. Drilling wells in water more than a kilometer deep can cost $50 million or more.
PEMEX NOT FACTORING IN REFORM
Pemex is under pressure to start new drilling projects to compensate for declining yields at its huge but aging Cantarell offshore field, where output dropped 15 percent in 2007.
The field, which now accounts for only 42 percent of Mexico's oil output, produced 1.243 million barrels per day in January, its lowest level in several years.
Exploration and Production Director Carlos Morales told the conference call Cantarell's output would vary between 1.2 million and 1.3 million bpd in 2008, a more upbeat outlook than that of Director General Jesus Reyes Heroles, who recently forecast a drop in output of 200,000 bpd by the end of 2008.
Mexican lawmakers are working on draft energy legislation that would give Pemex more autonomy and flexibility.
President Felipe Calderσn would like it also to permit Pemex which has sole rights to extract Mexican oil to form private partnerships with foreign firms to speed up its foray into deepwater. But leftwingers and many in a centrist opposition party oppose any private investment in oil.
Levin said Pemex was not factoring in a possible change to the law as it planned future projects.
(Editing by Matthew Lewis) |
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