Mexico's Cantarell oil output falls again in July

MEXICO CITY, Aug 26 (Reuters) - Crude output from Mexico's struggling Cantarell oil field fell for the 10th month in a row in July to 974,000 barrels per day, energy ministry data showed on Tuesday.

The fading jewel of Mexico's oil industry, Cantarell is now producing half what it was yielding at its 2004 peak, pulling down overall output in the world's No. 6 oil-producing nation and threatening Mexico's status as a top U.S. supplier.

The steady decline of around 15 percent annually in the field's output has pressured the divided Congress to tweak laws in the closed energy sector. The government, with backing from centrists, hopes to push a bill through congress to allow more private participation in the state-run oil business.

The conservative government's proposal seeks to shore up flagging output and reserves by having the national monopoly Pemex hire private companies under incentive-fee contracts, particularly in costly high-risk areas like deepwater oil.

Output at Cantarell, a shallow field in the southern Gulf of Mexico, fell again in July from 1.018 million bpd in June.

Cantarell, for years the source of 60 percent of Mexico's crude, accounted for 35 percent of Mexico's overall July oil output, down from 36 percent in June.

A senior Pemex executive said in July that output at Cantarell would drop to just 600,000 bpd by 2012.

While lawmakers debate bringing in more private investment, which is politically sensitive, Pemex is trying to increase output at less productive fields, such as the offshore Ku Maloob Zaap complex and the onshore Chicontepec field.

Seismic tests indicate there could be huge deep-sea oil deposits in the Mexican Gulf. But with laws against foreign partners, Pemex executives say it could be 20 years before Mexico is producing substantial quantities of deepwater oil.

(Reporting by Cyntia Barrera Diaz; Editing by David Gregorio)