October 20, 2015 / 9:57 PM / 3 years ago

Grupo Mexico sees $1 billion in oil investment over 5 years

MEXICO CITY (Reuters) - Mexican mining and railroad company Grupo Mexico expects to invest $1 billion in new oil projects over five years from a mix of contracts and joint ventures with national oil firm Pemex [PEMX.UL], a top executive said on Tuesday.

Ricardo Arce, head of Grupo Mexico’s oil drilling unit, said in an interview he sees crude output from the ventures reaching as much as 100,000 barrels per day over the next decade.

“We’re interested in exploring for and producing oil but that doesn’t mean we’ll stop being a conservative company,” said Arce, emphasizing new oil sector investments must be safe bets.

One of Mexico’s biggest conglomerates and controlled by reclusive billionaire German Larrea, Grupo Mexico is divided into mining, transportation and infrastructure divisions, and best known for its base metals production.

Arce, who heads the firm’s Perforadora Mexico unit, said he sees many growth opportunities stemming from a major energy reform Mexico finalized last year, and first-ever joint ventures with Pemex as the most attractive near-term projects.

In particular, Arce aims to compete for the offshore Ayatsil-Tekel-Utsil and Bolontiku-Sinan joint ventures as well as onshore Samaria, Cardenas and Mora projects, all of which would be in association with Pemex. Grupo Mexico has already drilled for Pemex at Ayatsil-Tekel-Utsil and Bolontiku-Sinan.

Grupo Mexico will also compete by itself to operate onshore contracts included in the next phase of the so-called Round One oil tender set for December, part of Mexico’s energy reform.

“We’ve just selected five fields where we’re deeply analyzing the prospects to determine which ones we’ll bid on and how much we’ll offer,” said Arce, noting that he expects each to require investments of between $20 million to $30 million.

The December onshore oil auction includes 25 fields constituting the third phase of the Round One tender, following two shallow-water auctions earlier this year.

Arce said Grupo Mexico will likely compete next year to develop oil projects in Mexico’s complex Chicontepec basin, where the company also has extensive experience.

He added that depressed oil prices have caused the company to negotiate a 15 percent to 20 percent reduction in day rates for the five offshore production platforms it currently leases to Pemex, or about $50 million in lower rates through next May.

Editing by Dave Graham and Lisa Shumaker

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