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Pemex to Resume Service Contracting for Gas Exploration in May

The CEO of Petroleos Mexicanos (Pemex) said the state-run oil company in May will resume offering multiple service contracts (MSCs) to develop Mexico's natural gas reserves.

Pemex plans to offer contracts to drill in gas fields in the Burgos Basin of northeastern Mexico and Veracruz, said Pemex CEO Luis Ramirez Corzo. The oil company in December won a court battle to allow the MSCs, which have been criticized by some Mexican legislators opposed to foreign investments (see NGI, Dec. 26, 2005).

After President Vicente Fox was elected in 2000, Pemex adopted reforms to permit foreign investment to exploit the country's oil and natural gas reserves. And in 2003, Pemex began taking bids from Mexican and foreign oil companies for 15- and 20-year MSCs, which allow private companies to develop -- but not own -- gas reserves in the Burgos Basin (see NGI, July 21, 2003).

Since its inception, Pemex has awarded about a dozen contracts to explore within the basin. However, many outside investors were wary of participation because of the legal challenges. However, now that the lawsuits appear to be settled, Ramirez said Pemex plans to once again encourage private companies to invest in Mexico's gas exploration.

The five MSCs still in place have increased Mexico's gas output by between 200-300 MMcf/d, Ramirez said. He did not detail how the new contracts would be set up, nor did he say where and when bids will be taken.

"We're implementing and designing new contracts," Ramirez told Mexico's El Universal. "They're more alive than ever."

According to Ramirez, Pemex's proven oil and gas reserves declined by 1.18 billion boe last year. Proven reserves at the end of 2005 stood at of 16.47 billion boe. Probable and proven reserves at the end of the year were 46.42 billion boe, a decline of almost 500 million boe from 2004.

Pemex produced an average of 5.06 Bcf/d in January and February, up 9.3% from the same period of 2005. Gas production from the northern fields hit a record in February with 2.03 Bcf/d, 40% of total national gas production.

In January and February, Pemex produced 1.67 Bcf/d in the Campeche marine area, 33% of total national production, up 33% from the same period of 2004. Gas output at Pemex's southern fields stood at 1.36 Bcf/d, almost 27% of total production. Also in the two-month period, Pemex produced 3.02 Bcf/d of associated gas and 2.04 Bcf/d of unassociated gas, up 3.7% and 18.9% respectively compared to January and February 2005.

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