Pemex to Invest US$30bn in Chicontepec Basin

Mexico's state oil company Pemex plans to invest 310bn pesos (today US$30bn) over 15 years to develop oil and gas reserves in the Chicontepec basin, Pemex director Raul Munoz said Tuesday in Veracruz state.

The project will require drilling 13,500 wells in the basin, which covers an area of around 3,800 sq km in the Chicontepec mountains straddling Veracruz and Puebla states, and is thought to hold at least 18 billion barrels of crude oil equivalent (boe), Munoz said. The first reserves in the area were discovered in 1926, but they and subsequent finds have not been fully developed earlier because of "technical reasons," Munoz said. Some 300 wells were drilled there in the 1970s, and all were producing wells, he added.

The initial stage of large-scale development for Chicontepec will comprise a field study of several blocks, the drilling of 200 wells and the completion of 50 additional wells, Schlumberger Oilfield Services and ICA-Fluor Daniel said in March after winning a US$500mn integrated oilfield services contract in Chicontepec.

Speaking Tuesday, Munoz said that first phase work would be in the Agua Fria and Amatitlan areas, and includes the acquisition of over 1,000 sq km of 3D seismic, the drilling of 300 wells, the construction of 177km of pipelines, five separation units and a compression station.

Munoz also formally announced Pemex' plans to invest 67bn pesos through 2006 to build 47 new offshore rigs and 56 pipelines for crude and gas production in the southern Gulf of Mexico. The investment recognizes the reality of the growing percentage of total production that comes from offshore operations: in 2002 offshore production represented 82% of Pemex' total output, compared to 77% in 1999. The program is designed to increase crude production in Pemex's Ku-Maloob-Zaap offshore area in the Gulf of Mexico, start gas production in the Lankahuasa basin, and develop the Crudo Ligero Marino field. The project is expected to produce 1.5 million barrels a day (mb/d) of crude oil and 1.4 billion cubic feet a day (bcf/d) of natural gas by 2006, helping Pemex to reach its expected reserve replacement rate of 100% in 2006. Pemex currently produces around 3.3mb/d of crude oil, of which it exports 1.9mb/d. Pemex plans to increase production to 4mb/d by 2006. Natural gas production is currently 4.4bcf/d, which Pemex plans to increase to 7bcf/d by 2006. The two projects, Chicontepec and the offshore program, mean that Pemex investment in 2003 will be a record 143bn pesos, President Vicente Fox said. Of this, 112bn pesos will be in new, physical investment, Munoz added.

The government will keep investing in Pemex to make it a world-class company and to ensure that the next government inherits a profitable outfit that can generate resources for Mexico's social needs, Fox said, emphasizing his commitment to keep the company under state control.

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