Spanish:
 
|
Pemex oil output to drop without private investment, chief says
Bloomberg
MEXICO
Petroleumworld.com 03 30 06Mexico risks a drop in oil output unless lawmakers allow for private investment in the industry, according to the chief executive officer of state-owned Petroleos Mexicanos, the world's third-largest producer.
Pemex, as the company is known, will leave billions of barrels untapped in deep Gulf of Mexico waters and in a costly onshore field without partners to provide technology and share risks, said Pemex CEO Luis Ramirez Corzo. Mexican law allows only Pemex to extract crude and natural gas and to refine oil, barring companies such as Exxon Mobil Corp. and Royal Dutch Shell Plc from investing in the industry.
The country since 1979 has pumped the majority of its oil from Cantarell, the world's second-biggest field by production, and reinvested little on other deposits, Ramirez said. With Cantarell supply declining for the first time this year, Pemex must emulate state-controlled companies such as Norway's Statoil ASA to drill in more remote areas.
``We're worried,'' Ramirez said in an interview from the 44th floor of Pemex's Mexico City headquarters. ``The problem is that today we have to begin making decisions that affect us 10 years from now.''
Congress has rejected calls by President Vicente Fox to amend the constitution to permit foreign companies to join with Pemex on concern the law change would be a step toward selling the state company to private investors.
Mexico's next president, who takes office following July 2 elections, and Congress will grapple with one of Pemex's biggest challenges since it was cobbled together 68 years ago from expropriated U.S. and U.K. oil companies, Ramirez said.
Big Choice
The country can choose to keep its oil industry closed and struggle to maintain supplies, or it can allow Pemex to take on partners and double oil output to 6 million barrels a day in 15 years, he said. Production now is about 3.3 million barrels a day.
``Hopefully we will not get to the point where we start seeing the effects of a reduction in production to react,'' Ramirez said.
Proven reserves have fallen every year for more than a decade, leaving the country with less than 10 years worth of oil reserves at current production levels.
Pemex is now seeking to replace output at Cantarell, which contained 35 billion barrels of oil when discovered in 1976. The field peaked in production at more than 2 million barrels a day in 2005 and will decline by 30 percent to 1.43 million barrels per day by the end of 2008, Pemex has forecast.
``It's hard to compensate for a super giant field with something much less than a super giant field,'' said David Shields, an independent energy industry analyst in Mexico City who published a book in October on Pemex.
Low-Grade Crude
Pemex plans to compensate for Cantarell's decline in the next few years by developing periphery offshore fields in the Gulf of Mexico, which requires a minimum investment of $12 billion a year, Ramirez said. The company has found that oil in the new offshore fields, such as Ku-Maloob-Zaap, isn't as abundant and is a heavier grade than markets will purchase. Pemex's production cost per barrel will rise to $7.20 in 2009 from $4.30 now as Cantarell declines, Ramirez said.
Since Fox took office in December 2000, Pemex has doubled the rate of investment in exploration and production. The effort also more than doubled Pemex's debt to $49 billion at the end of last year from $22 billion.
The government takes more than 60 percent of Pemex's revenue in taxes, leading to a net loss in 2005, a year of record profits for Exxon Mobil and Chevron Corp. In 2005, Pemex paid the government a record $54 billion of taxes and duties on sales of $86 billion.
Congress approved a law last year to reduce Pemex's taxes by about $2 billion in 2006 and by as much as $5 billion by 2010, enabling the company to meet its investment target and keep its debt at current levels, Ramirez said.
Not Enough
The tax reduction is not enough, said Alexandra Parker, an analyst with the credit rating company Moody's Investors Service in New York. The company's liabilities are larger than its assets under U.S. accounting methods and it continues to record net losses, Parker said.
Moody's rates Pemex at Baa1, or two levels above its lowest investment-grade rating. The ranking is the same as Mexico's sovereign rating on the assumption the Mexican government won't allow the company to default. On a stand-alone rating, Pemex is assigned a five on a scale of one to six, with six being the riskiest.
``It's a weak credit quality,'' Parker said. ``The two major issues we see are a declining reserve base, and the liabilities continue to rise.''
Lacking Technology
The long-term solution to replace Cantarell will require investment of $17 billion a year to tap deep-water deposits and an onshore field called Chicontepec, which now contains 40 percent of Pemex's proven, probable and possible oil reserves, Ramirez said.
Chicontepec has remained untapped since it was discovered in 1926 because the small pockets of oil tucked in fractured rock require drilling technology that Pemex lacks. Pemex needs to spend $38 billion over 20 years in Chicontepec to drill 20,000 wells, more than during its nearly seven-decade history, Ramirez has said. Production cost per barrel in Chicontepec will be $12 a barrel, he said.
Pemex has drilled its first exploratory wells in deep water and announced this month it may have discovered a field with 10 billion barrels of oil. It will take up to a decade to develop the deposit, Ramirez said.
``To tackle Chicontepec and deep water, we need to have a legal framework in which we can work with other companies in strategic alliances,'' Ramirez said. ``To insist that Pemex alone can develop a project of this nature isn't realistic.''
To contact the reporter on this story:
Thomas Black in Mexico City at tblack@bloomberg.net
Bloomberg News 30 03 06Copyright © 2006 Bloomberg. All Rights Reserved.
Your
feedback is important to us!
We invite all our readers to share with us
their views and comments about this article.
Write to editor@petroleumworld.com
Any
question or suggestions, please write to:
editor@petroleumworld.com
Best
Viewed with IE
5.01+
Windows
NT 4.0, '95, '98 and ME +/ 800x600 pixels