MEXICO CITY, Sept 8 The Mexican government proposed on Wednesday a 2011 investment budget for state oil monopoly Pemex that was more than 30 percent below what the company had said earlier this year it would need.
The government of President Felipe Calderon proposed Pemex [PEMX.UL] be allotted 286.3 billion pesos ($22.2 bln) for capital spending in 2011, up 9 percent from 2010 but well short of the 376 billion pesos the company wanted.
Pemex is facing mounting capital investment needs as it plans to build a new oil refinery near Mexico City and seeks to develop new oil fields that would replace aging giants like Cantarell that supply the bulk of Mexican oil output.
The finance ministry, in its 2011 budget proposal submitted to Congress, did not explain why Pemex received less than it had said it would need.
Pemex's finances have deteriorated significantly in recent years as it has relied heavily on borrowing to fund its capital investment program.
The company's equity was wiped out last year by its growing debt load. It also faces a soaring pension plan deficit. [ID:nN30164662]
Mexican oil production fell by nearly 25 percent between 2004 and 2009 due as yields at Cantarell tumbled. Although output has been stabilized at about 2.55 million barrels per day, the long-term future of the world's No. 7 oil producer remains murky.
Pemex hopes to award contracts to redevelop marginal oil fields to private companies as part of a plan to bolster crude output. The government on Wednesday proposed reductions in taxes for these marginal fields in order to bolster their attractiveness to potential investors. (Reporting by Robert Campbell; editing by Missy Ryan, Gary Hill)