Schlumberger To Deploy 6 New Gas Rigs To Mexico's Burgos

MEXICO CITY, April 23, 2008 (Dow Jones Newswires)

Oil services firm Schlumberger (SLB) will move six drilling rigs into Mexico's Burgos basin in the second quarter under a contract with state-run Petroleos Mexicanos, confirmed a company spokesman on Wednesday.

Over the past year, Schlumberger has taken on a massive drilling program in the Chicontepec oil basin and in the southern region under project management contracts with Pemex, expanding its role in the Mexican market. The company is also looking at two new drilling contracts for Chicontepec that are expected to kick off in mid-2008.

Chairman and Chief Executive Andrew Gould, speaking on a Friday conference call with investors, said the company has drilled 1,000 wells in the Burgos area to date. The basin is already a major production zone, providing 22% of total gas output as of March, according to the energy ministry.

Mexico needs all the gas it can get. The ministry expects demand to hit 9 billion cubic feet a day by 2017, while production is expected to remain relatively stable at just under 7 billion cubic feet a day, including ongoing exploration programs.

Schlumberger has been active in Mexico for decades, and is now incurring heavy startup costs as it moves into new areas of the country. During the first quarter it added seven rigs, which Gould said were sent to the Villahermosa basin in the South. The area involves deeper reservoirs where Schlumberger has little experience.

"Every time we move to a new basin, there is a learning curve," said Gould.

Oil service companies stand to benefit as Pemex spends increasingly more money just to keep production stable as the country's easy oil dries up. Chicontepec, for example, was discovered in 1926, but Pemex began focusing on the complex formation only after cheaper-to-produce fields such as Cantarell began to decline.

President Felipe Calderon is pushing an energy reform bill that would let Pemex offer service contracts that offer performance-based incentives, hoping to expand the role of private firms in the industry.

"If it does go through, it's probably a positive for everybody," said Gould.

MEXICO CITY, April 23, 2008 (Dow Jones Newswires)