Pemex Plans $20B E&P Investment to Boost Production

MEXICO CITY (Dow Jones Newswires), Jan. 23, 2009

Mexican state oil monopoly Petroleos Mexicanos will increase its total debt load by $2.5 billion to $3 billion this year, as the company plans to boost investments to nearly $20 billion.

During a Thursday meeting with journalists, Pemex CEO Jesus Reyes Heroles said the company plans to carry out an aggressive investment program in an attempt to halt a steep fall in oil production.

The company plans to invest $19.4 billion this year, mainly in exploration and production, up from $18 billion in 2008 investments.

Pemex managed to lower its total debt in 2007 and 2008, but Reyes Heroles said this year's financing needs will not put a strain on the company.

"This is nothing that causes us to lose sleep," he said, referring to the company's financing needs.

As of end-September, Pemex's total bonds and bank loans fell 3.1% on year, to $48.2 billion.

Reyes Heroles did not provide any details on when the company plans to sell debt in the market, but did say it would be a combination of bank loans and bonds. Last week he told lawmakers that the company was ready to sell bonds at any moment.

Pemex plans to invest $2.2 billion this year in the giant Cantarell oil field.

"This gives you an idea of the amount of work going on at Cantarell," he said.

Cantarell is declining at a rate of 30% a year, and the company needs to invest in natural gas injection and well drilling and repairs. Pemex expects average production to fall to 756,000 barrels a day this year, down from one million barrels a day in 2008.

Pemex plans to drill 14 new wells and carry out 59 well repairs at the field in an attempt to slow the rate of decline.

Another large investment project is Chicontepec, where the company plans to invest $2.3 billion this year. Chicontepec only produces around 35,000 barrels a day, but Pemex plans to drill over 1,000 wells a year over the next decade in an effort to eventually produce more than 700,000 barrels a day.

Mexican oil production fell 9% last year to an average of 2.8 million barrels a day.  

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