Mexico Energy Minister Hopes to See Pemex Form Deepwater JVs

Mexico's energy minister said Thursday she hopes an upcoming reform will allow the state oil company to form alliances to develop reserves in deep waters of the Gulf of Mexico.

In the U.S., oil firms are already drilling a few miles from the U.S.-Mexico maritime border in 9,000 feet of water, and Mexico risks watching oil seep into wells on the U.S. side.

"We're looking for (Petroleos Mexicanos) to have the flexibility to form associations like all the companies in the world, to be able to explore and produce in highly difficult areas, such as deepwater," Energy Minister Giorgina Kessel said during a Thursday television interview.

She said Pemex, as the state oil firm is known, needs to act fast to develop oil fields that overlap the border, where production on the U.S. side is set to begin in two years.

"We currently have evidence that there are shared reserves between the U.S. and Mexico," she said. "In two years the 'straw effect' could happen, and we could be losing pressure in our reservoirs."

Pemex is currently barred from teaming up with outside oil companies, which would force the state firm to embark on multi-billion-dollar oil projects on its own. This would buck a global trend of oil majors forming deepwater joint ventures to split the exploration risk and capital costs.

"Today there is not a single company in the world that doesn't form associations for deepwater activities," she said.

Kessel said she expects the government to finish drafting an energy reform bill by the end of March, and expressed optimism that it could be passed in the current legislative session.

Strong resistance is already building in the face of energy reform. Former presidential candidate Andres Manuel Lopez Obrador of the left Democratic Revolutionary Party, or PRD, is accusing the government of trying to privatize the state industry and has vowed to rally his supporters to block any efforts to open the industry to outside capital.

Copyright (c) 2008 Dow Jones & Company, Inc.


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