Mexico eyes up to 14 oil deals by year-end

MEXICO CITY Mon May 3, 2010 4:53pm EDT

MEXICO CITY (Reuters) - Foreign energy companies could be at work in Mexico's oil sector for the first time in more than seven decades as soon as the end of 2010, a senior executive of Mexico's state oil monopoly Pemex said on Monday.

Pemex intends to award up to 14 contracts to private companies to boost production at marginal onshore oil fields along the Gulf Coast and at its Chicontepec project, Pemex's exploration and production chief Carlos Morales said at the Reuters Latin American Investment Summit in Mexico City.

"The goal is that we are assigning the first contracts for the end of 2010," Morales said.

Lawmakers loosened Mexico's strict energy laws in 2008 to let Pemex pay bonuses to companies hired as contractors as a way to attract private-sector help as tumbling output threatened the country's status as a major oil exporter.

However, Morales told Reuters that Pemex PEMX.UL is now confident it can keep oil production stable at a minimum of 2.5 million barrels per day through 2012 and increase it in 2013 to between 2.6 million and 2.8 million bpd.

Mexican oil production has fallen by almost a quarter over the last five years as yields at the giant but aging Cantarell oil field tumbled.

The slide has led to concern among some analysts that Mexico, currently one of the United States' main suppliers of imported crude, could become a net oil importer this decade.

Morales dismissed those concerns, saying he now expects Cantarell to keep producing above 500,000 bpd through 2012 as the slower rate of output allows crude trapped in the field's gas layer to escape into the lower productive zones of the field. He said it was unfeasible Mexico would become an oil importer, unless Pemex ceased all efforts to lift production.

Cantarell pumped 589,000 bpd in March, according to government data.

The nearby Ku Maloob Zaap (KMZ) field, now Mexico's biggest producer, will only start to decline in 2013 and should yield an average 850,000 bpd until then, Morales said.

FIRST DEEPWATER FIELD

By 2013 Pemex should have its Tsimin and Ayatsil oil discoveries producing in the shallow waters of the Gulf of Mexico which will compensate for the anticipated declines at KMZ and Cantarell, Morales said.

However, achieving the 2.8 million bpd target by 2013 depends on better results at Pemex's troubled Chicontepec project, Morales said, the main reason the company is anxious to award as many as eight contracts at the area through auctions this year.

The company intends to push ahead with the contracts despite a lawsuit with the Supreme Court that seeks to have some of the regulations underlying the new contracting system thrown out for violating Mexico's constitutional ban on private companies controlling any oil reserves in the country.

"We can't wait," said Morales, adding that, while it would be preferable to have the court case out of the way, Pemex was ready to act now.

Pemex also hopes to award five or six contracts at older oil fields that still have reserves that can be produced but which Pemex has not had the capital, technology or staff to tackle.

Fields in two areas alone -- Altamira in southern Tamaulipas state and Cinco Presidentes in southern Veracruz state -- could together add more than 150,000 bpd output with help from private firms, although the peak production level is unlikely to be sustained for a long time, Morales said.

Companies eager to get into the deep waters of the Gulf of Mexico will have to wait as Pemex wants to do more drilling to increase its understanding of the area and ensure it gets the best deals possible from partners, Morales said.

Pemex has already completed one deepwater exploration well this year which found natural gas, and it plans another three, including a delimitation well at its Tamil discovery that could lead to Mexico's first deepwater oil project being put into development.

"(The Tamil well) will most probably be completed in November," said Morales, "We expect that by the end of next year we will have the project conceptualized to be able to submit it for approval and start development."

Pemex will also drill a delineation well at its deepwater Lakach discovery later this year and plans to spud its first probe near the border with the United States in the Perdido area in October.

(Additional reporting by Catherine Bremer, Adriana Barrera and Mica Rosenberg; editing by Jim Marshall)

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