July 29, 2008 / 9:32 PM / 9 years ago

Mexico says reform won't reverse oil woes fast

MEXICO CITY (Reuters) - It will be hard for Mexico to restore flagging oil output before 2020 to recent levels of 3 million barrels per day, even if the government pushes through a plan to boost foreign investment in production efforts, a top energy official said on Tuesday.

Mexico’s status as a top supplier of crude oil to the United States is under threat because of a steady fall in output, which in the last year has slipped below the country’s recent production goal of 3.0 million bpd.

“What the country needs is to return to these levels for 2020. It will be hard to achieve that,” Deputy Energy Minister Jordy Herrera told reporters after an oil sector event in Congress.

President Felipe Calderon hopes centrists in Congress will help pass a plan to boost private investment in the country’s state-run oil sector.

Asked if that plan would let Mexico get back to producing 3.0 million bpd by 2020, Herrera said: “It’s difficult due to the time it takes to create infrastructure and the administrative challenges in making Pemex grow.”

Other Mexican energy officials have said reforms would not boost production quickly, but Herrera’s comments were the gloomiest yet on how long it could take for production to recover, even if Calderon gets his plan approved.

REFORM PROPOSALS

The government proposal would allow state oil monopoly Pemex to use incentive-fee contracts to hire private firms with the aim of boosting output and reserves.

Calderon submitted his proposal in April, sparking protests from left-wingers and triggering weeks of televised debates in Congress. Centrists have presented their own proposal which is broadly similar to Calderon‘s.

Herrera said the timetable for getting output back to 3.0 million bpd “will depend on the type of reform set by the Congress.”

The U.S. Energy Information Administration lists Mexico as the world’s No. 6 producer of crude oil, but production has slid from peaks around 3.4 million bpd in 2004 and since last October has been below the 3 million bpd goal.

The drop is largely due to sliding yields at Mexico’s aging Cantarell oil field, where crude output fell again in June for the ninth month in a row to 1.018 million bpd, its lowest level in more than 12 years.

The government hopes to make up the drop in production by using the proposed contract scheme to lure private companies into developing potentially huge deepwater oil fields.

Energy Minister Georgina Kessel told reporters separately that Mexico is still in talks with the United States over deepwater fields straddling the U.S.-Mexico maritime border in the Gulf of Mexico.

Companies are poised to start producing at the fields from the U.S. side of the border as soon as 2010, she said, which could suck oil from Mexico’s side of the border.

Additional reporting by Armando Tovar; Editing by Christian Wiessner

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