Chicontepec and Cantarell
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RIO DE JANEIRO (Dow Jones), Nov. 4, 2009

Steel-tube manufacturer Tenaris on Friday said it sees Mexican state oil company Petroleos Mexicanos reducing its emphasis the Chicontepec basin in 2010 as it develops its production strategy.

"For 2010, we're going to see a reduction in the activity in the Chicontepec area," said Guillermo Vogel, the company's vice president of finance, during a conference call to discuss third-quarter results. "This is more than anything because Pemex wants to spend a little bit more time in analyzing how to better access this reservoir."

The Mexican Congress is currently analyzing the budget for 2010, and, despite pressure to reduce spending, is likely to maintain Pemex's allocation broadly unchanged, or slightly lower, he said, adding that the final decision is expected in a couple of weeks.

If there is any slight reduction in spending, it probably wouldn't translate into a reduction in activity, because of lower industry costs, he said.

Pemex helped underpin Tenaris' activity during what was otherwise a tough year, amid a sharp decline in oil prices. The number of oil rigs operating in Mexico is slightly below 180, up from 130 last year, he said.

Pemex has nearly 900 wells this year in Chicontepec, and this could fall to around 600 in 2010, he said. The company is likely to return to Chicontepec in 2011 and 2012, he said.

The company is more likely to spend more in the southeast of the country, in areas such as Ku-Maloob-Zaap, where Pemex sees more opportunity to increase production than in Chicontepec, he said.

In terms of natural gas, with prices at current levels, "I think we won't see a reduction in the third-party drilling that is happening there," he said.

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