Pemex Launches 2nd Round Of Gas Contracts

Pemex launched its second round of natural gas production contracts Thursday, tendering two blocks of reserves in the Burgos basin.

Pemex is seeking bids for multiple service contracts to develop Pandura-Anahuac and Ricos, which combined are expected to generate investment of $1.85 billion to produce 325 million cubic feet a day of natural gas by 2007.

Two other blocks included in the second round, Pirineo and Monclova, will be tendered Aug. 17. Those blocks are expected to involve combined investment of $900 million to produce 140 million cubic feet a day.

The 15-year contracts are expected to be awarded in October and November.

In the first round, which concluded in January, Pemex awarded five blocks and drew investment commitments of $4.34 billion to produce 425 million cubic feet a day of gas.

Sergio Guaso, who heads Pemex's multiple service contracts program, said at a press conference that the bidding rules were modified to help more Mexican companies participate.

Several Mexican companies took part in the first five contracts, in partnership with international oil companies including Brazil's Petroleo Brasileiro SA (PBR), or Petrobras, Spain's Repsol YPF SA (REP), Lewis Energy of Texas and Italian-Argentine concern Techint (TCH.YY).

Guaso said around eight Mexican and eight foreign companies have expressed interest in the current round.

He said that Pemex is already working on a third round of multiple service contracts, but stopped short of saying whether the company will apply them to crude oil in the future.

"We haven't made a decision yet," Guaso said, but added that Pemex is considering "all kinds of projects."

Burgos, which lies across the U.S. border from South Texas, is Mexico's main source of non-associated natural gas. Pemex is aiming to double output at Burgos to 2 billion cubic feet a day by 2007 with the multiple service contracts.

The multiple service contracts have had limited success in attracting oil majors, and two of the original seven blocks received no offers.

Among factors that kept the likes of Exxon-Mobil Corp. (XOM) and France's Total SA (TOT) from bidding last year were the complicated nature of the contracts, the fact that winners can't book the reserves, and reservations about the quality of some of the blocks.

Opposition legislators who charge the contracts violate a constitutional ban on oil and gas concessions have filed legal charges against some Pemex officials and against the contract winners.

The legal action has been slowing down work on the projects as contractors advance at the minimum rate stipulated in the contracts.