Latin Finance - March/April 2011 - 47

mexico oil

guidelines to include preventative Striking Less measures. Mexico’s national hydrocarbons Although Pemex is still producing commission has introduced new a considerable amount, with its 2.6 regulations, whereby Pemex will have to million bpd ranking it fourth globally do extensive reporting periodically. in production of crude oil for 2010, To try and raise production, Mexico according to PIW rankings, dropping from will this year start to award long-awaited third in 2009, future production will be performance based contracts approved in more difficult, as it involves significant late 2010. These contracts are the result deep water drilling. of reforms to energy policy in 2008, which “Pemex needs to diversify risk, as in was when the Petroleos Mexicanos Law deep water drilling the risk of loosing was passed. money is very high, it is possible to spend The legislation was designed to give $50-$100 million and not find anything,” Pemex more autonomy and flexibility in says Carlos Ramirez, an economist controlling its budget, and also led to the specializing in Mexico at political risk introduction of an independent regulator. consultancy Eurasia Group. In the past five years there have been some new Pemex Capital Expenditure ($bn) discoveries including XuxRamping up investment Tsimin with prospective resources of 1.2 million 25 barrels of oil equivalent (boe), Ayatsil-Tekel, with prospective resources of 725 million boe, 20 and Pit-Baksha with 510 million boe. However, they are 15 considerably smaller than the Mexican oil strikes of the past says Ramirez, who previously 10 worked for Pemex. “Chicontepec region, for 5 which the government had big expectations three to four years ago, has big reserves,” 0 says Ramirez. “But there have 2003 2004 2005 2006 2007 2008 2009 2010 been operational problems and Source: Pemex production expectations have been reduced considerably,” Performance-based contracts give cash he adds. Proven reserves total 800,000 incentives to companies, and are aimed at boe at Chicontepec, versus Pemex’s total proved reserves of boe of 14 million, adds increasing the involvement of the private sector, both nationally and internationally. Ramirez. “This year is critical as we will begin Pemex adds that there are significant to see what the appetite is from foreign prospective resources in the deep waters companies for the new performanceof the Gulf of Mexico, which it says total based contracts,” says Conway. around 30 billion barrels. It has already done some drilling in deep waters of the Weak Reform Gulf, though so far results have been Energy reforms of 2008 were not as mixed, with some discoveries of gas, extensive as oil companies looking at such as Lakach, where gas production partnering with Mexico would have liked. is expected to start by mid-to-late 2014, The constitution does not permit sharing but not commercial oil. Ramirez blames ownership of the oil produced, and insufficient drilling investment. the government did not have sufficient As a result of the Gulf oil spill Pemex political support to push harder. says it is continuing its exploration work “The government probably wanted a in the area, but it is revising operational

more aggressive reform in 2008, like the style of the Petrobras reforms, but it had to settle with a limited one because of lack of support from the PRI,” says Ramirez. The PAN party is currently in power, and the expectations in Mexico are that the PRI, which was in power in Mexico for 70 years up until 2000, will return to government. Analysts say the biggest challenges for the oil sector regarding prospective declines will be during the next presidency, and so it will be up to the government then to seriously consider further reforms. Whether it will be possible to pass depends on the next government getting enough support in congress. The performance based contracts will be awarded for three oil fields between March and July 2011 for mature fields in the south of Mexico, which are Santuario, Carrizo and Magallanes. The first two fields are producing 6,833 bpd and 6,777 bpd respectively, with Carrizo not producing any, according to Pemex. However, according to the oil company, proved, probable and possible reserves are 104 million boe, 40 million boe and 51 million boe, respectively, at Santuario, Carrizo and Magallanes. 2011 Pemex expects additional production from Santuario, Carrizo and Magallanes to reach an additional 120,000-150,000 barrels a day by 2025, starting with an additional 42,000 barrels a day when the new contracts kick in. Output was 13,610 bpd in February. When they will start production depends on the length of the bidding process for the contracts. A first round of bidding was expected to be completed by summer 2011. The goal is to apply the new performance contracts to the deepwater, but Conway expects that providing incentives commensurate with risk will be a challenge. Pemex officials agree that this is just the start, and any further reforms will take time. The consensus among analysts

March/April 2011

LatinFinance 47



Latin Finance - March/April 2011

Table of Contents for the Digital Edition of Latin Finance - March/April 2011

Latin Finance - March/April 2011
Contents
The Argentine Comeback
Argentina Commodity Investment
Man of the Year
Central America-China
Finance Minister Scorecards
Apax Profile
Chile Retail Sector
Innovations in Infrastructure Finance
New Rules for Corporate Debt Buyers
Inside the Creaking Airport Sector
Mortgage Market Needs Facelift
Violence Weighs on GDP
Latin Finance - March/April 2011 - Latin Finance - March/April 2011
Latin Finance - March/April 2011 - Cover2
Latin Finance - March/April 2011 - 1
Latin Finance - March/April 2011 - Contents
Latin Finance - March/April 2011 - 3
Latin Finance - March/April 2011 - 4
Latin Finance - March/April 2011 - 5
Latin Finance - March/April 2011 - 6
Latin Finance - March/April 2011 - 7
Latin Finance - March/April 2011 - 8
Latin Finance - March/April 2011 - 9
Latin Finance - March/April 2011 - 10
Latin Finance - March/April 2011 - 11
Latin Finance - March/April 2011 - 12
Latin Finance - March/April 2011 - 13
Latin Finance - March/April 2011 - The Argentine Comeback
Latin Finance - March/April 2011 - 15
Latin Finance - March/April 2011 - 16
Latin Finance - March/April 2011 - 17
Latin Finance - March/April 2011 - 18
Latin Finance - March/April 2011 - 19
Latin Finance - March/April 2011 - 20
Latin Finance - March/April 2011 - 21
Latin Finance - March/April 2011 - 22
Latin Finance - March/April 2011 - 23
Latin Finance - March/April 2011 - Argentina Commodity Investment
Latin Finance - March/April 2011 - 25
Latin Finance - March/April 2011 - 26
Latin Finance - March/April 2011 - 27
Latin Finance - March/April 2011 - Man of the Year
Latin Finance - March/April 2011 - 29
Latin Finance - March/April 2011 - 30
Latin Finance - March/April 2011 - Central America-China
Latin Finance - March/April 2011 - 32
Latin Finance - March/April 2011 - 33
Latin Finance - March/April 2011 - 34
Latin Finance - March/April 2011 - 35
Latin Finance - March/April 2011 - 36
Latin Finance - March/April 2011 - Finance Minister Scorecards
Latin Finance - March/April 2011 - 38
Latin Finance - March/April 2011 - 39
Latin Finance - March/April 2011 - Apax Profile
Latin Finance - March/April 2011 - 41
Latin Finance - March/April 2011 - 42
Latin Finance - March/April 2011 - 43
Latin Finance - March/April 2011 - 44
Latin Finance - March/April 2011 - 45
Latin Finance - March/April 2011 - 46
Latin Finance - March/April 2011 - 47
Latin Finance - March/April 2011 - 48
Latin Finance - March/April 2011 - 49
Latin Finance - March/April 2011 - Chile Retail Sector
Latin Finance - March/April 2011 - 51
Latin Finance - March/April 2011 - 52
Latin Finance - March/April 2011 - 53
Latin Finance - March/April 2011 - 54
Latin Finance - March/April 2011 - Innovations in Infrastructure Finance
Latin Finance - March/April 2011 - 56
Latin Finance - March/April 2011 - 57
Latin Finance - March/April 2011 - 58
Latin Finance - March/April 2011 - 59
Latin Finance - March/April 2011 - New Rules for Corporate Debt Buyers
Latin Finance - March/April 2011 - 61
Latin Finance - March/April 2011 - 62
Latin Finance - March/April 2011 - 63
Latin Finance - March/April 2011 - 64
Latin Finance - March/April 2011 - 65
Latin Finance - March/April 2011 - Inside the Creaking Airport Sector
Latin Finance - March/April 2011 - 67
Latin Finance - March/April 2011 - 68
Latin Finance - March/April 2011 - 69
Latin Finance - March/April 2011 - 70
Latin Finance - March/April 2011 - 71
Latin Finance - March/April 2011 - 72
Latin Finance - March/April 2011 - Mortgage Market Needs Facelift
Latin Finance - March/April 2011 - 74
Latin Finance - March/April 2011 - 75
Latin Finance - March/April 2011 - Violence Weighs on GDP
Latin Finance - March/April 2011 - 77
Latin Finance - March/April 2011 - 78
Latin Finance - March/April 2011 - 79
Latin Finance - March/April 2011 - 80
Latin Finance - March/April 2011 - 81
Latin Finance - March/April 2011 - 82
Latin Finance - March/April 2011 - 83
Latin Finance - March/April 2011 - 84
Latin Finance - March/April 2011 - 85
Latin Finance - March/April 2011 - 86
Latin Finance - March/April 2011 - 87
Latin Finance - March/April 2011 - 88
Latin Finance - March/April 2011 - Cover3
Latin Finance - March/April 2011 - Cover4
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