Mexico’s state-owned Petroleos Mexicanos (Pemex) plans to launch three new contracts in the next two months to expand associated natural gas projects in the northeastern Burgos and Sabinas basins, located near the Texas border. The contracts, estimated to be worth $2 billion, would increase Mexico’s gas production by an estimated 200 MMcf/d once they ramp up, Pemex CEO Luis Ramirez Corzo said in a statement.

The tenders would be offered for exploration within the states of Nuevo Leon, Coahuila and Tamaulipas. Burgos is the biggest gas basin in Mexico, and no tenders have previously been offered in the Sabinas/Parras basin, which is located in a prolific coal mining region within the state of Coahuila. The new tenders will be offered as “financed public works contracts,” which would offer investors more security, Ramirez said.

The new contracts are similar to Mexico’s multiple service contracts (MSCs), implemented by Pemex in 2003 (see Daily GPI, July 18, 2003). The MSCs allow private companies to develop — but not own — gas reserves within Mexico. Pemex has so far awarded about a dozen MSCs to explore for associated gas in the basin, and the five MSCs still in place have increased Mexico’s gas output so far by between 200-300 MMcf/d, Ramirez said. But the MSCs have been legally challenged since they were enacted, because critics charge they sidestep the Mexican constitution, which does not allow private investment.

Between 1997 and 2005, almost 2,600 wells were drilled in the Burgos Basin, and more than 5,500 drilling sites have been identified there. Burgos’ gas production reached a record 1.34 Bcf/d in July, and total production within the basin is forecast to reach around 2 Bcf/d by 2011, Ramirez said. Pemex’s total current gas production is 5.5 Bcf/d, and the country is forecasting gas output will reach 8 Bcf/d by 2010 (see Daily GPI, May 25). To keep up with demand, Pemex currently imports about 389 MMcf/d, which is down from 800 MMcf/d in 2004, Ramirez said.

Pemex’s total oil and gas sales in 2006 are expected to reach $92 billion, Ramirez said. The amount is more than double what Pemex sold in 2000 and represents 11% of Mexico’s gross domestic product. Between 2001-2005, Pemex received an average annual investment budget of close to $10 billion, well ahead of the average $3.5 billion per year in the previous 20 years. About 443 exploratory have been drilled during Fox’s tenure, Ramirez noted.

Going forward, Ramirez said Pemex will expand its deepwater exploration program offshore in the Gulf of Mexico. Since Fox became president, Ramirez said 3,065 development wells have been drilled offshore Mexico and almost 1,200 miles of offshore pipe have been installed. In addition, he said 45 offshore platforms have been installed in the past six years.

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