The director of Mexico’s oil monopoly Petroleos Mexicanos (Pemex) said the new natural gas multiple-service contracts that would allow private investment in the country’s oil and gas resources are nearly complete, and should be tendered by November as planned.

Unlike risk contracts, which allow profit sharing, the exploration and production contracts would offer fixed payments in cash in exchange for the investment and work. The foreign investors would not “own” the assets — just the profits from the services offered. The investors opting into the contracts also would be asked to develop the fields that already have proven reserves, with the option of extending their activities to adjacent areas within the limits of the area assigned under the contracts.

Usually, energy companies demand a percentage of oil or gas they produce, but Mexico’s Constitution does not allow Pemex to pay companies to use its resources or sell off its assets to a third party, said Raul Munoz Leos. Instead, companies will be able to make an investment, and once production begins and Pemex “has the resources from that production,” Munoz said Pemex will use a formula to pay a yield over the capital the companies have invested.

Mexico has been hampered by a growing population and a slow economy, but energy experts have long urged the country to exploit its valuable energy sources instead of being a net importer of oil and natural gas. Between January and November 2001, Pemex reported natural gas imports averaged 294 MMcf/d. The Mexican Energy Ministry said Pemex needs to invest at least $1.9 billion over the next five years just to upgrade its natural gas facilities and oil refineries. The spending is coupled with estimates that energy demand will be up at least 3% over the next decade, which translates into an increase of at least 14% in production to meet the country’s needs — before imports.

Pemex will first use the contracts with private companies to help double the production from its prolific Burgos gas field from its current level of 1.03 Bcf/d. The first call for bids will be on a group of 10 corporate lots in the Burgos Basin, in the Rio Bravo area, which is adjacent to the U.S. border. Pemex estimates the contracts would provide an additional 1 Bcf/d that could be achieved and sustained between 2005 and 2011. The first round of contracts will be worth between $6 billion and $8 billion to contractors over 20 years.

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