Pemex can 'triple' drilling program says official

Pemex could triple the amount of its exploratory drilling to an average of 1,800 wells/year from the current 600 as the result of new contracting arrangements approved under reform legislation.

Eric Watkins
Oil Diplomacy Editor

LOS ANGELES, Nov. 5 -- Petroleos Mexicanos could triple the amount of its exploratory drilling to an average of 1,800 wells/year from the current 600 as the result of new contracting arrangements approved under reform legislation, according to a senior company official.

Pemex Exploration & Production (PEP) director Carlos Morales Gil told Mexico's El Financero newspaper that the new contracts provided for in the Pemex law—Regulating Article 27 of the Constitution—and to its amendments "are going to allow us to quicken the pace and build a stronger Pemex."

In this regard, Morales told the paper that, with the substantial improvement in Pemex's ability to execute projects on land and offshore, the state-owned firm will be able to replenish 100% of its reserves by 2012 and begin developing deepwater deposits in 2014-15.

The boost in exploration capacity will increase output in the medium term, so that it is back to more than 3 million b/d, the level of Pemex production until 2007.

"We're going to be able to generate more value and more oil revenue," Gil said, explaining that the new legislation will enable Pemex to offer incentives that will improve services from contractors.

In particular, Morales said the new contracting arrangements would provide an additional incentive for companies to work hard, improve, and be more efficient, creating more value for the Mexican people.

Morales said the new legislation empowers PEP to award contracts directly under certain conditions, as when safety and protection of the environment are involved or in the case of risk or emergency.

All other contracts will be awarded under the traditional arrangement of competitive bidding, he said.

Greater flexibility
Morales emphasized that Pemex will be able to reach its targets of higher production and reserves because it also will have greater flexibility and capacity to manage its budget more independently.

He added, however, that greater accountability and transparency would also be required of it.

He said the country would likely not have to import crude oil to meet its needs.

"We don't see the possibility of Mexico becoming an importer. Pemex is producing 2.8 million b/d, which is far more than we consume—1.3 million b/d on average."

Morales' views largely echoed those of Energy Secretary Georgina Kessel Martinez, who told delegates at a conference: "As a result of the reform that has been approved, the country would reverse the decline in crude oil production that we have seen in recent years."

Kessel said that, due to the new legislation, Pemex "will be able to develop highly complex deposits, such as Chicontepec and the deep waters in the Gulf of Mexico, in an effort to boost output, the rate of reserve replenishment, and the rate of recovery at our deposits."

Contact Eric Watkins at hippalus@yahoo.com.

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