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Pemex Chief Calls for Larger Exploration Budget

Without new discoveries and more investment for exploration activities, Mexico's state oil monopoly Petroleos Mexicanos (Pemex) could be importing oil within 10 years, the director general said last week. However, if it doubled its current $20 billion annual investment, Pemex could become one of the largest oil and natural gas exporters, according to Luis Ramirez Corzo, who took over Pemex last November.

In an interview with Mexico's El Universal, Ramirez said that at its current investment level of $10 billion a year, Pemex will make enough discoveries to keep exporting crude oil. However, because the basins now producing are declining, exploration dollars have to rise.

"Everything depends on something as simple as defining what kind of company we want," he said. "It will have to correspond to what kind of player we want to be in the world." Last year Mexico was the second-largest oil importer to the United States, after Canada.

Ramirez wants to open Pemex to more private investment, which is not allowed under Mexico's Constitution. His desire could be closer to reality after Mexico's leading congressional party, the Institutional Revolutionary Party (PRI) said in its party platform that it would support energy reforms. Until recently, the PRI has been strongly opposed to any form of privatization.

An immediate task, Ramirez said, is to overhaul Pemex by rewriting a union contract to free up some of Pemex's finances from government control. He also wants to create an independent board for Pemex, which he said would cut billions in operating costs.

"We have to convince Mexican society, the legislature and our workers that we are talking about an opening, and it has to be an intelligent one," Ramirez told El Universal. He noted that most of Pemex's current investment over the past four years -- $40 billion -- has gone toward drilling, with less than $5 billion spent on exploration. And reserves are dropping, he noted.

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