March 18, 2010 / 8:32 PM / 8 years ago

UPDATE 2-Mexico posts modest rise in oil replacement rate

* Proven oil and gas replacement rate improves

* Improvement due in part to lower 2009 production

* Pemex still struggling to strike deepwater oil (Recasts, adds detail on reserves, Reuters calculation)

By Robert Campbell

TULA, Mexico, March 18 (Reuters) - Mexico added slightly more crude oil and natural gas to its proven reserves last year than in 2008 and posted a higher production replacement rate as output declined, according to data released on Thursday.

President Felipe Calderon said state oil monopoly Pemex [PEMX.UL] replaced 77 percent of the oil and gas it extracted last year with proven new discoveries, up from a 71.8 replacement rate for 2008.

The new proven reserves include the development of previously unproven finds and revisions to older data.

As recently as 2005 the replacement rate was only 22.7 percent, but Pemex has since stepped up spending on exploration as it battles to curb a five-year slide in crude output that has left production levels down by nearly a quarter.

“We want Pemex to produce more, for the benefit of Mexicans,” Calderon told a ceremony at an oil refinery in the central Mexican town of Tula to mark the 72nd anniversary of the nationalization of the country’s oil industry.

The replacement rate is the best in many years and keeps Pemex on track to achieve its goal of replacing 100 percent of oil and gas output annually by 2012.

However the higher rate was mainly due to lower oil and gas output rather than improved exploration results, according to Reuters calculations. Mexican oil and gas output was down about 5 percent in 2009 at around 1.38 billion barrels of oil equivalent (boe), according to preliminary data, implying Pemex added approximately 1.063 billion boe to its reserves last year, just 15 million boe more than in 2008.

It was unclear whether the Jan. 1, 2010, data was affected by the U.S. Securities and Exchange Commission relaxing some of its reserve accounting rules with effect from Jan 1, affecting all oil companies registered with it.


Pemex officials would not provide the company’s actual reserves and production data on Thursday, saying it would be released on Friday when the company holds a conference call with bond investors to discuss its exploration results.

Pemex has been struggling to overturn a legacy of underinvestment in exploration as it races to find new fields to replacing aging giants like the offshore Cantarell field.

The decline of Cantarell and a lack of new field development options threatens Mexico’s status as a major oil exporter and is denting a key source of government revenue.

Mexico’s proven oil and gas reserves stood at 20 billion boe in 2003 but have tumbled by around a third since then.

The proven reserve replacement rate is one of the main indicators of the long-term health of an oil company. Analysts regard any replacement rate below 100 percent as worrying.

However Pemex is already replacing all of its production by a broader measure of reserves, known as 3P, for proved, probable and possible oil and gas reserves.

Mexico’s 3P replacement rate was 100 percent of production in 2009, versus 102.1 percent in 2008. Reserves classed as probable or possible can often be reclassified as proven in future years after more study.

Mexico is pinning its long-term hopes for oil production on the deep waters of the Gulf of Mexico, where the government says up to 29.5 billion boe remain to be found.

But Pemex has so far not made any large deepsea finds, classing only two of 13 wells as successful discoveries of oil and gas, while a third well drilled last year that found natural gas is still under evaluation. [ID:nN11209249] (Editing by David Gregorio)

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