MercoPress. South Atlantic News Agency

Mexican oil opens to greater private participation.

Mexico's government owned oil giant Pemex will open exploration and production operations to the private sector announced Area Manager Carlos Morales.

The pilot tender will take place in the Chicontepec field in the Gulf of Mexico coast state of Veracruz. That first 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 estimates that deposits could reach some 54 billion barrels of crude oil, more than the nation's current total proven reserves.

Mr. Morales said that the Chicontepec will be implemented with the multiple services contracts, or CSM, already used by Pemex for partnerships in the natural gas sector.

The conservative ruling government of President Vicente Fox has been pushing for years to open the nation's oil industry to greater private (and foreign) investment but the political opposition which zealously protects the constitutionally mandated government owned Pemex has repeatedly been against foreign investment in the oil industry.

Pemex estimates 600 million US dollars are needed to open the Chicontepec field, which reportedly has potential reserves of 139 billion barrels of crude, far beyond the 37 billion barrels of Cantarell, the offshore field that currently accounts for nearly 80% of Mexico's oil output.

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.

Mr. Morales revealed that Pemex anticipates a 2% drop in production from Cantarell by 2007 with the deficit growing to 10% in 2009. Mexico has pumped 11 billion barrels of crude from Cantarell since beginning drilling operations in 1979.

Pemex is the Mexican government's main source of revenue equivalent to 60% of gross Treasury revenue representing a third of the federal budget.

But Pemex 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 CSM, which keep the resources and physical plant in state hands while allowing private firms to operate the fields. CSM have only been used only in the Burgos Basin natural gas deposits in north eastern Mexico, but Mr. Morales announced that Pemex is devising a more flexible CSM, with "reasonable profits" expectations for companies who decide to operate in Chicontepec.

Mexico, which currently has crude reserves of some 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.

Luis Ramirez Corzo, Pemex CEO said that exploration in deep sea waters requires technology and resources Pemex does not possess.

Pemex needs partners because that technology "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; although they are willing to share it in business ventures".