Pemex Calls for First Burgos Basin Bids

Mexico's state oil company Pemex has called for bids from private companies to produce gas on four blocks in the northeast Burgos basin under multiple service contracts (MSCs).

Pemex is expected to call for bids on another three blocks within two weeks to complete the first round tender, Dow Jones reported. "I think this is consistent with Pemex's plan to increase its activity in the development of natural gas," Standard & Poor's analyst Jose Coballasi told BNamericas. The seven blocks cover an area of about 13,300 square kilometers, with initial probable reserves of 800bcf.

Pemex expects total investments will be 6-8bn pesos (today US$578mn-US$770mn) and Burgos production should double to about 2 billion cubic feet a day (bcf/d) by 2006, Dow Jones said. Investment in the first four blocks is expected to reach 1.6bn pesos (today US$157mn), according to government website

The four blocks on offer and their respective required investments are Ricos (336mn pesos), Reynosa-Monterrey (444mn pesos), Mision (110mn pesos) and Corindon-Pandura (736mn pesos). Bidding rules are available for Reynosa-Monterrey and Mision until September 11, bids must be received by September 17 and economic bids will be opened on September 18. Bidding rules are available for Corindon-Pandura until September 25, bids must be received by October 1 and economic bids will be opened on October 2. Bidding rules are available for Ricos until October 9, bids must be received by October 15 and economic bids will be opened on October 16.

Burgos lies across the border from Texas, and is Mexico's main non-associated gas producing region. "In my opinion the country needs to develop these fields because the use of natural gas in Mexico has been increasing over the past couple of years, so the development of these resources is welcome news for the country," Coballasi said. "But there are a number of opinions out there about who should be doing it," he added, referring to the opposition within Mexico to private sector participation in the oil sector. Pemex designed the MSCs to confront the growing natural gas demand that is outpacing production and pushing up imports, but opponents say the MSCs could pave the way to privatizing the state-run oil industry. The 20-year MSCs could still face legal challenges by opposition politicians who say they violate a constitutional ban on oil and gas concessions in the state-run oil industry. Pemex says the only difference between the MSCs and traditional service contracts is that they reduce costs by wrapping many service contracts into one. "This is just an innovation over an existing practice at Pemex," he said, adding, "This is just basically bundling up a number of contracts that in the past used to be offered independently." Dow Jones said the contracts are far from ideal for private companies, which take on the investment risk without managing the natural gas sales, which will be handled by Pemex. Furthermore, the state company will take back control of the fields once the contracts expire.

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