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Pemex Considering Alliances with Foreign Energy Producers

Mexico's state oil monopoly Petroleos Mexicanos (Pemex) is considering an alliance with Royal Dutch Shell and other energy companies to jointly explore a region of the Gulf of Mexico that sits on its maritime border with the United States, according to Carlos Morales, director general for exploration and production.

Morales confirmed that Pemex is considering a partnership with Shell, as well as other foreign energy companies. The joint venture under consideration would produce up to 2.5 million boe..

"Pemex is willing to work with other companies in regards to exploration and production," Morales said. "The company is completely free to choose who it wants to work with, however new legislation is required to outline how they actually work together."

Mexico's constitution bars private investment in oil and natural gas on Mexican soil, but Pemex may engage in joint-investment projects abroad. For instance, Pemex partnered with Shell in 1993 to build a refinery in Deer Park, TX. However, a joint venture by Pemex offshore likely would not begin before 2010, because of an agreement between Mexico and the United States to not explore along their shared maritime borders before the end of the decade.

The agreement with the United States prevents Pemex from "realizing any operations outside its own waters" on the border between the two countries Morales said, but it does not prevent the company from operating in other international waters. In the 1980s, Morales noted, Pemex had an oil platform off the coast of Argentina in a joint-project called Mexpetroleo.

Morales could not confirm any details of a possible partnership with Shell, but Mexican newspaper El Universal said Pemex was considering an investment of up to $5 billion.

Pemex has been struggling to tap its estimated 54 billion boe in the Gulf of Mexico because of a lack of capital and technical know how. About half of its estimated reserves lie in waters that are more than 500 meters deep. Pemex CEO Luis Ramirez said in a speech earlier this month that by tapping the deepwater reserves, the company could more than double its current output to 7 million boe/d within 10 years.

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