Pemex Says It's Evaluating, Not Reconsidering, Chicontepec

MEXICO CITY (Dow Jones), Oct. 12, 2009

Mexico's state oil monopoly Petroleos Mexicanos, or Pemex, said it's evaluating performance in the Chicontepec oil region but isn't planning to suspend work there.

The El Universal newspaper on Thursday cited Juan Carlos Zepeda, head of the National Hydrocarbons Commission, as saying Pemex should rethink the way that it's going about developing Chicontepec, where results have been below expectations.

The commission was set up earlier this year under the 2008 sector reforms to oversee Mexico's oil and gas exploration and production and make recommendations to the state company.

Pemex's chief financial officer, Esteban Levin, said the company is constantly evaluating the project, but rejected the notion it was reconsidering it.

"Chicontepec is Mexico's largest hydrocarbon reserve, so it's not a project that we can suddenly turn around and say, hey, I'm not going to do it," Levin told reporters Thursday, according to a transcript from Pemex.

Levin stressed the long-term nature of the project, and added that "of course [drilling projects] are going to continue."

With production from the offshore giant Cantarell fields in steep decline, Pemex is banking on Chicontepec and other reserves to restore crude output levels in the long term.

Chicontepec covers an area of 3,785 square kilometers in Veracruz and Puebla states and is estimated to have nearly 18 billion barrels of crude oil equivalent in total reserves.

The state company has awarded several billion dollars in contracts for work at Chicontepec to oil service companies including Schlumberger Ltd., Weatherford International Ltd, Halliburton Co. and a unit of Mexican billionaire Carlos Slim's industrial and retail conglomerate Grupo Carso SAB.

Output from the region was only 31,000 barrels a day in August, and production from the geologically difficult deposits is likely to end this year well below initial expectations of 70,000 barrels a day.

Pemex's overall crude production has fallen to under 2.6 million barrels a day from a record 3.4 million barrels a day in 2004 as a result of the decline at Cantarell.  

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