Pemex to Spud Sixth Deepwater Well in 2007

VERACRUZ Jun 29, 2007 (Dow Jones Newswires)

Mexican state oil company Petroleos Mexicanos plans to drill its sixth deepwater well before the end of this year as the company pushes its exploration efforts further into the Gulf of Mexico, an official said Friday.

Pemex estimates that the bulk of its undiscovered oil and gas reserves lie in deep waters of the Gulf, and the company hopes to tap these reservoirs to arrest declining oil production.

Pemex's crude output has been slipping since reaching a record of 3.38 million barrels a day in 2004, largely because of the decline in production at the giant Cantarell field. Output so far this year has averaged 3.15 million barrels a day.

"After we finish the fifth one, we will continue drilling," said Carlos Morales Gil, Pemex's head of exploration and production, speaking to Dow Jones Newswires on the sidelines of an oil conference.

Pemex is currently drilling the Lalail well, which Morales said should be finished by September. Depending on the results of this well, Pemex will choose the next drilling location.

"We have several alternatives," said Morales.

Pemex's first four deepwater wells all discovered either oil or gas, but Morales declined to make any predictions on Lalail. "We can't make any advanced analysis," he said.

Pemex is a newcomer to drilling in waters deeper than 500 meters. It completed its first deep water well in 2004.

Analysts say that current budget restrictions will make it difficult to finance projects in the Gulf. Furthermore, the country's constitution bars private companies from forming associations with Pemex to explore for and extract oil.

Copyright (c) 2007 Dow Jones & Company, Inc.

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