Pemex Still Struggling to Restore Oil Production

MEXICO CITY (Dow Jones Newswires), October 6, 2008

Pemex is still struggling with oil production issues that forced the Company to shut in 250,000 barrels nearly two weeks ago.

The amount of production shut in has fluctuated between 150,000 barrels a day and 250,000 barrels a day during the period, and is still not back to normal, a company spokesman said Monday.

He said the company will have more information later Monday. The episode will erode Pemex's overall production numbers for September and October.

A combination of storm-battered refineries in the U.S. canceling crude shipments from Mexico and port closures along Mexico's Gulf coast led to the shut in. In late September Pemex filled its crude storage facilities to the brink because of the export problems, and had to shut production because it had no place to store the crude.

Then bad weather in the Gulf of Mexico forced Pemex to close some of its ports on and off for over a week, worsening the export problems.

All three of Mexico's Gulf Coast oil ports have been open since late Thursday, but the U.S. National Hurricane Center said on Monday that a tropical depression is developing in the Campeche Sound. Ports were still open as of Monday morning.

Jaime Alvarran, an official at Mexico's national weather service described the storm as "mild," and said it will probably make landfall on Tuesday near the city of Veracruz.

Even if Pemex is spared from the latest storm, overall production numbers for September and October will be ugly.

"September is going to be an irregular month because of the lost production on storage problems," said David Shields, a Pemex expert who publishes the Energia a Debate magazine.

Mexico is already suffering from a secular decline in oil production - output fell to a 13-year low in August to 2.76 million barrels a day. This puts at risk Pemex's revised production target for 2008 of 2.8 to 2.85 million barrels a day.

A Pemex executive said last week that Pemex shut in some fields in the Campeche Sound to reduce overall output. Around 80% of Mexico's oil production comes from offshore fields in the Gulf of Mexico.

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