Mexico’s strategy to attract private energy companies appears to be working, especially for the oilfield services market, according to officials at the Offshore Technology Conference, which opened Monday in Houston.

For instance, in the past three years, Houston-based Halliburton’s Mexican business volume in the Gulf of Mexico (GOM) has nearly tripled. CEO Dave Lesar said business has been “growing dramatically. We see it as a great long-term benefit for Halliburton.”

Noble Corp., another Houston-based offshore driller, said its offshore rig count in Mexican waters has grown from one jack-up rig 18 months ago to eight rigs today. And an added bonus is the higher price of contracts in Mexican fields: service fees are 24% because the contract durations are 18-24 months, unlike mostly short-term U.S. contracts.

In fact, Noble said it has moved so many jack-up rigs into Mexico that it has four times as many high-end rigs there as in the U.S. portion of the GOM. And another offshore driller, Nabors Industries, was able to put six rigs in Mexican waters in 12 months, and it expects more business in the months to come.

Mexico’s oil and gas industry has long failed to maintain enough production to keep up with demand. In the past few years, it has been working to entice more private industry. However, instead of only concentrating onshore, officials have turned their sights toward the barely touched deepwater.

Halliburton’s Lesar said Mexican oil and gas officials are embracing deepwater’s potential. The national oil and gas company, Petroleos Mexicanos (Pemex), wants to aggressively use new technology, and Lesar said the state-owned company appreciated what state-of-the-art technology could do.

Oilfield services companies are the biggest benefactors of Pemex’s largesse. With the exception of the controversial multiple service contracts in the country’s oil and gas fields, Mexico’s Constitution bans outside ownership of its oil and gas reserves. But instead of waiting for the laws to change, Pemex got a bigger budget — $12 billion this year — and of that, about $10 billion is slated to be spent on exploration and production.

At the end of 2003, Pemex estimated that Mexico had about 18.9 billion boe. Most of those reserves, especially for natural gas, remain untapped, both onshore and offshore. Mexican demand for gas-fired power generation is expected to reach 7 Bcf/d by 2009, and with daily production now only about 4.5 Bcf/d, the country has to tap some of those reserves or continue to rely on imports.

But Pemex has stepped up in the past two years. Mexico likely has had the “most significant” rig activity in a single area for the past year, according to Nabors. The country’s first new deepwater well is expected to be completed by early 2005, sited close to the U.S. border in the Perdido Foldbelt. Water there is more than 6,000 feet deep in an area known as the “doughnut hole,” which is an area that was in dispute between U.S. and Mexican officials for several years.

Now firmly in Mexico’s hands, Pemex and oilfield services companies are attempting to exploit a GOM region where Unocal’s Trident and Shell Oil Co.’s Baha and Great White were discovered.

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