MEXICO CITY (Reuters) - Mexico’s finance ministry on Friday said state oil company Pemex will be allowed to deduct more costs for developing some projects so the firm can maintain production, which has been steadily declining since 2004.
The cost recovery adjustments will allow Petroleos Mexicanos, as Pemex is formally known, to continue producing some 150,000 barrels per day of oil and 500 billion BTUs of natural gas per day from so-called marginal fields that the company was given in 2014 as part of a landmark energy opening that ended the its decades-old monopoly.
The finance ministry said in a statement that the increased cost recovery will allow Pemex to continue developing projects that are profitable before taxes.
The costs recovery allowed for onshore fields, with the exception of areas in the Chicontepec basin, was raised from 20 percent to 40 percent. For shallow water fields it was raised from 14 percent to 35 percent.
“In the case of projects that are profitable before taxes and fees, it makes sense to continue the activities,” the ministry said, adding that Pemex would need to show that a given field would not be profitable under the current tax structure to be eligible for the modified rates of recoverable costs.
Mexico hit peak crude output of 3.4 million bpd in 2004, while production so far this year has averaged about 2.02 million bpd.
Reporting by David Alire Garcia; Editing by Dan Grebler