Pemex upbeat about Mexico's oil production goals

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Mar. 20 -- Mexico's Petroleos Mexicanos, faced with reports of steep production declines, has announced plans to raise its replacement rate to 100% by 2012 for proved reserves of oil and natural gas.

"The rate of integrated return of proven reserves is 71.8%…smaller than the objective of 100% by the end of the current administration," said Carlos Morales Gil, Pemex director of exploration and production, in a conference call with analysts.

Morales Gil's statement, however, coincided with publication of a new report by the US Energy Information Administration this week that sees Mexican oil production slipping by 10% in 2009 largely due to falling output from Cantarell oil field.

"EIA forecasts that Mexico will produce 2.9 million b/d of oil in 2009 and 2.7 million b/d in 2010," it said, explaining that "the decline is driven mainly by falling production at the supergiant Cantarell field, which has only been partially offset by higher production from other areas."

In its remarks, EIA acknowledged that Cantarell field is one of the largest oil fields in the world, but that production there has declined "dramatically in the past several years."

As production at the field declines, so too does its relative importance to Mexico's oil sector: Cantarell contributed 36% of Mexico's total crude oil production in 2008, versus 62% in 2004.

In 2008, it said, Cantarell produced 1 million b/d of crude oil, down more than 30% from the 2007 level of 1.47 million b/d and down nearly 50% from the field's peak production level of 2.12 million b/d in 2004.

Cantarell's production stood even lower this January at just 772,000 b/d.

Despite the evident downturn, however, Mexican officials remain optimistic that Cantarell will average 756,000 b/d in 2009 due to increased investment in drilling and well maintenance.

Mexican officials also believe they can slow, and even reverse, the country's declining production over time due to increased production from other regions, especially Chicontepec.

On Mar. 18, Mexican President Felipe Calderon said that his country's proved oil reserves, which fell 2.7% in 2008 to 14.3 billion boe, were declining at a slower pace now than in 2007.

"We are halting the fall in reserves," he said, explaining that Mexico found 1.5 billion bbl of oil and natural gas in 2008, 41% more than in 2007. The discoveries, he said, replaced 72% of the amount of oil and gas Mexico produced last year—essentially the same figure cited by Morales Gil.

Chincontepec potential
"There are a lot of reservoirs we need to explore and develop," said Calderon on his visit to the Chicontepec region, an occasion which celebrated the 71st anniversary of the nationalization of Mexico's oil industry.

Calderon's visit to the oil-producing region and his statement concerning its future development reflect optimism at Pemex over Chicontepec's potential.

Last month, Morales Gil cited independent reports in claiming 139 billion bbl of oil equivalent at Chicontepec. At the time, Morales Gil said about 18 billion bbl could be recovered over the next 30 years using current technology, while the rest could be "squeezed" out by new technology yet to be discovered.

Morales Gil said Pemex is working on a "model contract" to govern Chicontepec development. It would give incentives to companies to bid and possibly introduce new technologies throughout the development contract.

Meanwhile, Morales Gil said the current production schedule for Chicontepec calls for the conventional drilling of more than 17,000 wells in 29 fields with the eventual goal of producing around 100 b/d oil from each one of them.

Contact Eric Watkins at hippalus@yahoo.com.

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