Mexico’s state oil monopoly Pemex awarded its first-ever private oil-field operating contracts Thursday as the company seeks to kick-start foreign investment in the nationalized energy sector.
British energy services firm Petrofac won the right to operate two of the three mature oil fields up for grabs, and Mexico’s Administradora de Proyectos de Campo (APC) won the third.
Petrofac, which designs, builds and maintains facilities used in extracting and processing oil and gas, will be the first foreign company to operate fields in the world’s number seven oil producer in more than 70 years.
The new contracts are the fruit of 2008 reforms aimed at attracting more private investment into the lumbering oil industry and bringing new dynamism to the sector.
The fields total only around 1.5 per cent of Mexico’s proven reserves of 13.8 billion barrels, but Pemex is hoping strong interest in other areas, especially deep-water contracts off the Gulf of Mexico planned for next year, will help reverse a slide in production.
Mexican oil output has fallen 24 per cent since a 2004 peak of 3.4 million barrels per day and a renewed slide could one day force it to become a net crude importer.
“With these contracts we are awarding today ... we are just starting the work,” said Carlos Morales, head of Pemex upstream operations, after the announcement in the city of Villahermosa, Tabasco, an oil-producing state on the Gulf coast.
“We are sure that we will be able to significantly increase the recovery of these reserves for the benefit of all Mexicans.”
Around a third of Mexico’s budget is funded by oil revenues so the decline in production has had serious implications for the country’s financial health and was one of the reasons behind a ratings downgrade in 2009.
Nationalized since 1938 and a large source of Mexican pride, Pemex has managed to stabilize oil output at around 2.6 million bpd and is aiming for 3 million bpd by 2015.
Pemex has not yet discussed private involvement in its largest oil fields, Cantarell and Ku Maloob Zaap, which make up more than half the country’s production. The company has sunk billions of dollars in the complicated Chicontepec project, but with disappointing results so far.
More than 50 companies bought information packets about the Carrizo, Magallanes and Santuario fields in southern Mexico to get a peak at Pemex plans, twenty-seven made bids but only 17 fulfilled all the requirements.
Global players like Halliburton Co. [[entity]]alliburton Co. [[/entity]]AL-N, Schlumberger Ltd [[entity]]hlumberger Ltd [[/entity]]LB-N and Repsol had bid for the contracts, but were out-priced. The contracts were won by the companies offering to produce a barrel of oil at the lowest cost.
Petrofac, a FTSE 100 group, offered to produce crude for $5.01 (U.S.) per barrel in the Magallanes and Santuario fields, well below Pemex’s maximum price. APC offered $5.03 per barrel for the Carrizo field.