Mexico Finding Ways to Allow Private Investment in Drilling
EFE News Services Friday, February 04, 2005Mexico's oil giant Pemex, which has complained that statist constraints prevent it from investing to find and extract more of the national economy's thick black lifeblood, says it is drawing up contracts that will provide for unprecedented private, most likely foreign, investment in drilling for crude.
Carlos Morales, head of exploration and production for the state company, told journalists Thursday that during the second half of this year, Pemex will seek bids from firms interested in pumping oil from the Chicontepec field in the Gulf coast state of Veracruz.
That tender will be followed in 2006 by the opening to private investment of exploration efforts in the deep waters of the Gulf of Mexico, where Pemex says its expects to find some 54 billion barrels of crude oil, more than the nation's current total proven reserves.
Morales said that firms taking part in the Chicontepec project will do so by way of the multiple services contracts, or CSMs, already used by Pemex for partnerships in the natural gas sector, while deepwater prospecting in the Gulf will have to take place under a different kind of model.
The conservative government of President Vicente Fox has been pushing for years to open the nation's oil industry to greater private - meaning, for the most part, foreign - investment. But the political opposition, which zealously guards the constitutionally mandated statist nature of Pemex, has balked at an overhaul that benefits foreign investors.
Pemex executives are looking for around 6 billion pesos ($535.7 million) worth of investment in the Chicontepec field, which contains both crude oil and natural gas.
Chicontepec reportedly has potential reserves of 139 billion barrels of crude equivalent, far beyond the 37 billion barrels of Cantarell, the offshore field that currently accounts for nearly 80 percent of Mexico's oil output.
The figure of 139 billion barrels is somewhat staggering, in that it represents nearly three times Mexico's current total proven reserves. If only half of that potential were realized, Mexico would be in a league with Iraq and Kuwait as mega-producers of oil.
Pemex expects production at Cantarell to begin declining in 2006 and is hoping to compensate for the shortfall with light marine crude from fields near the coast of Tabasco state in the Bay of Campeche and with heavy crude from Ku-Maloob-Zaap, which lies in the Gulf waters north of Cantarell.
The state-owned firm says 800,000 barrels per day should be flowing out of Ku-Maloob-Zaap by 2008 and that it is aiming for output of 250,000 b/d of light crude from the wells in the Bay of Campeche by 2009.
While important, Morales said, those two initiatives "are not the replacement for Cantarell because Cantarell can't be replaced." He noted that Pemex anticipated a 2 percent fall in production from its crown jewel in 2007 with the deficit growing to 10 percent in 2009.
Mexico has pumped 11 billion barrels of crude from Cantarell since beginning drilling operations there in 1979.
Pemex is the Mexican government's cash cow, paying the equivalent of 60 percent of its gross revenues to the treasury every year in the form of various levies that in turn underwrite a third of the federal budget.
The company has been struggling to keep pace with developments in the capital-intensive oil industry, hampered by a constitutional straightjacket that bars private ownership of Mexico's hydrocarbons and thereby limits investment. Pemex has sought to address this problem with the CSMs, which keep the resources and physical plant in state hands while allowing private firms to operate the fields.
So far, the CSMs have been used only for exploitation of the Burgos Basin natural gas deposits in northeastern Mexico, but Morales said Thursday that his company is devising a more flexible CSM offering scope for "reasonable profits" to firms drilling for crude oil in Chicontepec.
In the Gulf, meanwhile, Pemex has identified four deepwater areas thought to hold substantial deposits of crude and says it will need $15 billion annually over the next 15 years for exploration efforts. Morales said the state-owned giant will open a tender next year for private firms wanting to participate in that project.
Mexico, which currently has crude reserves of around 48 billion barrels, has only explored 18 percent of its potential oil-bearing territory.
Pemex is forecasting production of 3.8 million b/d in 2006 and 4 million the following year, though it says that by 2007, success with deepwater projects could boost output to as much as 7 million barrels per day.
Earlier this week, while announcing the discovery of up to 54 billion barrels in the deep waters of the Gulf, company chief executive Luis Ramirez Corzo said that exploration in those waters requires technology and resources Pemex does not possess.
He said the largest state-owned companies in the world, such as Brazil's Petrobras, have opened up to be able to receive capital, technology and project-management skills, which "is what we need to optimize our natural resources in terms of hydrocarbons."
The Pemex chief said the company needed partners because the requisite technology cannot be bought, "it's not for sale. Twelve companies in the world, which have invested a lot of money and are the owners of this technology, have exclusivity, but are willing to share it in business ventures."
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