Pemex to Increase Oil Production in 2011 – CEO

CIUDAD DEL CARMEN, Mexico (Dow Jones)

Mexican state oil monopoly Petroleos Mexicanos, or Pemex, will raise its crude oil production this year and be producing more than 2.6 million barrels a day by the end of 2011, Chief Executive Juan Jose Suarez Coppel said Friday.

In 2010, Pemex produced 2.576 million barrels a day, just short of its internal goal of meeting or beating 2009 output of 2.6 million barrels a day.

"Moreover, through our new contract models and investment program, we will lay the groundwork for a pace of production that will bring us to 3 million barrels a day in the next administration," said Suarez, speaking at an event to commemorate the 1938 expropriation of the petroleum industry.

President Felipe Calderon leaves office at the end of 2012, by which time Suarez estimated Pemex will be producing 2.7 million barrels a day.

Suarez also said that in 2010, Pemex replaced more than 100% of the oil it produced with new finds, and that for the first time since 1979, the country's total reserves--which include proven, probable and possible reserves--didn't decline.

Earlier this year, Pemex issued its first incentive-based tenders for oil exploration and production as allowed under a 2008 reform law designed to draw outside experts to stop sliding production.

The first tenders are for mature fields in the southern state of Tabasco. The second round will be for mature fields in the north, followed by tenders at the oil-rich but geologically difficult Chicontepec basin.

Pemex also plans to use the flexible contracts to exploit deep waters of the Gulf of Mexico where it has significant potential reserves but no production.

The new contracts offer a bonus for production above a certain level, but no shared-risk and no payments in oil.

They are intended to draw expert oil-services companies, as well as oil majors that generally prefer shared-risk where they get to keep part of the oil and benefit from the upside when oil prices are high.

Pemex oil production peaked in 2004 at close to 3.4 million barrels a day thanks to Mexico's supergiant Cantarell fields in the southern Gulf of Mexico. As Cantarell declined, Pemex's production fell steadily.

Copyright (c) 2011 Dow Jones & Company, Inc.


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