Pemex Completing 7th Deepwater Well

MONTERREY, Mexico (Dow Jones Newswires), May 30, 2008

Petroleos Mexicanos is completing a seventh deepwater oil well in the Gulf of Mexico that contains a heavy grade of oil in an area the company is optimistic about developing, a Pemex manager said Thursday.

Pemex deepwater manager Guillermo Perez Cruz said the Tamil well has discovered oil with a gravity of 18 API. The gravity of crude oil is measured according to the American Petroleum Institute's formula, where lower numbers mean a heavier blend.

Perez Cruz said so far the well looks like the most promising so far in Pemex's deepwater program.

"We will start running tests next week," he said on the sidelines of an oil conference.

Pemex's refining network can only process oil of 21 API or higher, but Pemex plans to upgrade the refining network to take heavier crudes.

Pemex hasn't found commercially viable oil reserves at any of the first six deepwater wells drilled since 2004, and only one has enough natural gas to warrant development.

Perez Cruz said Pemex will continue accelerating the deepwater program, and will contract a second deepwater rig in August that can drill in waters up to 6,000 feet. Pemex has only drilled in up to 3,000 feet of water. According to slides in his presentation, Pemex will begin another two deepwater wells this year.

Pemex hopes to produce 500,000 barrels a day from deepwater wells by 2021, helping to compensate for output declines elsewhere. Pemex President Jesus Reyes Heroles said that the under-explored Mexican side of the Gulf of Mexico holds more oil and natural opportunities than the U.S. side, where companies have been operating in deep waters for years.

Pemex will contract another three deepwater rigs in 2010, one of which can drill in waters up to 9,000 feet. "The good stuff is coming," said Perez Cruz.

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