Pemex to Open Data Room for Burgos Basin Tender

Pemex is planning to open a data room in November for companies interested in six to eight new contracts to produce natural gas in Burgos basin on the border with Texas. Outlining details of the contracts and tender process at a two-day energy forum, Luis Ramirez, head of exploration and production at Pemex, said the contracts would be finalized and the development blocks defined in October. Pemex will tender the contentious multiple service contracts individually in rapid succession starting in November. In February next year, the proposals will be evaluated and the contracts signed in March 2003, Ramirez said.

Access to the data room, which will provide detailed seismic information about the area to be developed, will be free and the blocks of land range between 200 square miles to 650 square miles. Pemex and the government say private participation is needed to double non-associated natural gas production at Burgos to around 2.0 billion cubic feet per day (cfd) by 2006 to meet fast-rising demand. The forum in Mexico City was packed with representatives from international oil majors, independents and oilfield service companies. Ramirez said the new multiple service contracts have drawn much greater interest than expected, with around 75 companies from all over the world eager for more information. Although under the Mexican constitution, Pemex is forbidden to pay any company a percentage of the resource produced -- the normal form of payment for such work -- the contracts are widely viewed as a chance to get a foothold in Mexico's virtually closed oil and gas industry.

Oilfield service companies like the Schlumberger Ltd., Halliburton Co. and Precision Drilling Corp. have long worked in Mexico on service contracts. A key difference with the new contracts is that they will be renewable for up to 20 years instead of for just one or two years as before. Opponents say this amounts to a concession, which is banned under the constitution. Pemex said the contracts were similar to schemes used in Iran and Venezuela whereby companies are paid a set price to produce hydrocarbons, but ownership of the resource remains in state hands. The contracts have already drawn fierce political opposition. Critics say they are a step towards back door privatization of the cherished oil and gas industry, which was nationalized in 1938 and is seen as a symbol of Mexican sovereignty and economic independence. The key criteria for assigning contracts would be solvency, experience and execution capacity, Ramirez said. Drafts of the contracts have been passed to Congress for approval, although Pemex says this is a courtesy measure since the contracts are within the bounds of the constitution. Pemex said the Supreme Court would be the highest authority to rule on the legality of the contracts in the event of a dispute.