Pemex Hopes to Boost Oil Output 2.8MM B/D in September

MEXICO CITY (Dow Jones Newswires), August 28, 2008

Mexican oil production was below target for the second straight month in August due to operational snags, but Petroleos Mexicanos hopes to boost output above 2.8 million barrels a day in September unless storms cause temporary outages, a top Pemex executive said Thursday.

Mexican crude production is down 10% on year, curtailing exports from one of the U.S.'s top crude suppliers. Pemex exploration and production chief Carlos Morales said a leak at a marine pipeline forced the company to shut in 20,000 barrels a day in August, and repairs to some offshore equipment also affected output.

"We've had some operational problems," Morales told Dow Jones Newswires in an interview. "This, in some way, has prevented us from getting above 2.8 million barrels a day."

He said the pipeline snag will not affect production in September, and the company expects to get back above 2.8 million barrels a day next month unless the hurricane season forces Pemex to evacuate staff from the Gulf of Mexico and shut in oil wells.

Mexico produces around 2.2 million barrels a day in the Gulf, with a million barrels a day coming from the giant Cantarell oil field.

The company is closely monitoring Tropical Storm Gustav. Morales said Pemex should know by Saturday if the storm will head into the southern Gulf of Mexico where Pemex pumps the bulk of its oil.

Pemex still expects average production for 2008 to be above 2.8 million barrels a day, and then fall to around 2.75 million barrels a day in 2009. Average output for the first seven months of the year was 2.85 million barrels a day.

As recently as last year, Pemex expected to keep output stable at 3.1 million barrels a day through 2012, but a faster-than-expected decline at Cantarell has forced the company to revise its projections downward.

President Felipe Calderon is pushing an energy reform bill to expand private investment with incentive-based service contracts for oil production. Pemex is legally prohibited from forming joint ventures with other major oil firms, limiting its ability to move into difficult oil-production zones such as the deep waters of the Gulf of Mexico.

Morales said the reform will offer attractive enough rates of return to draw oil firms with expertise in deep-water drilling. By 2020, Pemex hopes to be producing 500,000 barrels a day in deep water, up from nothing at present.

The company also plans to develop new fields on land and in the shallow waters of the Gulf of Mexico to compensate for fields that are declining.

If Pemex fails to develop new oil fields exports will completely dry up in less than a decade from 1.4 million barrels a day at present.

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