CEO: Pemex Needs US$20bn Investment Annually for 20 Years
Mexico's state oil company Pemex needs investment of close to US$20bn a year over the next 20 years to explore and produce to its maximum potential, Pemex CEO Luis Ramirez Corzo said at an event to commemorate the 68th anniversary of the country's oil expropriation.
The goal is to increase crude production and reduce dependence on natural gas imports, Ramirez said. With this level of investment, Mexico could even become a natural gas exporter in the coming years.
Pemex invested an average 100bn pesos (US$9.43bn) a year during President Fox's administration from 2000-2005 to reverse declining crude oil and gas production, Ramirez said.
If Pemex had maintained the low level of investments seen prior to 2001, the company would be producing less than 1.8 million barrels a day (Mb/d) of crude instead of the average 3.4Mb/d expected for 2006, Ramirez said.
"This 1.6Mb/d difference is equivalent to the combined production of Oman and Qatar," he said.
Pemex's accumulated incremental oil production in the 2001-2005 period totals 2 billion barrels, according to Ramirez.
The company's investments during Fox's administration have increased its reserve replacement rate to 69% in 2005 from negative territory in 2000, allowing the company to improve its sustainability and growth potential, he said.
Pemex also began reversing its declining natural gas production in 2003 and the company will produce an average 5.3 billion cubic feet a day (Bf3/d) of natural gas in 2006, up from the 1.5Bf3/d that would be produced without increased investments, he added.
The firm's reserves had declined to 46.4 billion barrels of oil equivalent (Bboe) on January 1, 2006, down only 500Bboe from the same date last year, Ramirez said. The company reduced the rate of decline to 2% a year from 2003-2005 from 5% annually from 2000-2002.
Pemex has also identified 54Bboe of prospective reserves through new exploration, 80% of which is in the southeast and deep waters in the Gulf of Mexico, he said.
Pemex registered the highest revenues of its history of 928bn pesos in 2005, while profits before taxes were 535bn pesos. However, the company's government contributions were 688bn, according to Ramirez.
In the last five years Pemex's tax payments have represented 110% of total operating profits, generating a net loss and a continuous financial deterioration, he said.
Recent changes in Pemex's tax regime will not completely solve the company's financial problems but will allow it to maintain its short-term operational viability, he added.
Ramirez noted other legal reforms achieved during Fox's administration including allowing the company to build electric cogeneration projects for self-supply, but said there is much work to be done to give Pemex more autonomy and operational efficiency.
"It is essential to reach national political agreements to continue making the changes Pemex requires," he said.
President Fox has submitted a bill to congress that would allow private participation in unassociated natural gas exploration as well as a separate bill to allow private participation in hydrocarbons storage, transport and distribution, he added.
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