Mexico sees oil bidding in December

By Robert Campbell

MEXICO CITY (Reuters) - Work on new contracts that let private oil companies explore for oil in Mexico is on schedule and bids for the first deals should be received by December, a senior executive of state oil company Pemex said on Friday.

Mexican law bans private participation in the oil industry but Pemex is keen to bring in international oil companies to help boost falling oil production, which has dipped to its lowest level since 1995.

"We're on track to have a model of the contract ready by the end of June and then we will start having consultations" with industry, Pemex exploration and production chief Carlos Morales told the Reuters Latin American Investment Summit.

International oil companies have been quietly watching developments in Mexico due the widely held belief that unexplored areas, such as the deeper waters of the Gulf of Mexico, hold billions of barrels of oil.

Private oil companies have been locked out of Mexico since 1938 when the country nationalized the industry. Many Mexicans still oppose allowing foreign firms back in, even under limited terms permitted by reforms enacted last year.

Changes to energy legislation put in place in 2008 allow Pemex to offer incentive-based contracts to private companies. The companies will work as Pemex contractors and will not have any ownership over oil production or reserves.

Critics of the reform call it back-door privatization. Supporters say the changes are needed to bring in capital and expertise.

Morales said he expected Pemex to offer between five and 10 exploration contracts to foreign oil companies by the end of September and bids should be received on the contracts by December.

The contracts will offer incentive payments to operators based on the size and profitability of discoveries they make. Contractors also will be expected to develop any discoveries they make on behalf of Pemex.

The first bidding round will likely cover all major oil and gas producing areas in Mexico including the Gulf of Mexico as well as older onshore areas such as the Chicontepec oil fields and the Burgos natural gas basin, Morales said.