Pemex should save on gas contracts

The Associated Press

An official of Mexico's state oil monopoly said Oct. 17 the company should save at least 15 percent on costs under the multiple service contracts it's tendering for natural gas production. Petroleos Mexicanos, or Pemex, awarded the first of seven contracts Oct. 16 to Spain's Repsol YPF SA, to develop the Reynosa-Monterrey block in the Burgos basin of northeastern Mexico.

Repsol, which bid US$2.44 billion for the 20-year contract, said Oct. 17 it will invest US$170 million in the first three years, including US$42 million in 2004.

Sergio Guaso, director of Pemex's multiple service contracts program, told reporters Oct. 17 that by packaging the different services into a single contract, Pemex will achieve efficiencies of at least 15 percent.

Pemex will pay over a four-year period for wells that are completed and producing, at a rate of 40 percent the first year, 30 percent the second, 20 percent the third and 10 percent the fourth, Guaso said.

Guaso didn't seem worried that Repsol's was the only bid for the first block. Exxon Mobil Corp. and France's Total SA had bought the data packages for Reynosa-Monterrey, but eventually didn't submit bids.

Guaso acknowledged, however, that the fact participants can't book reserves, since oil and gas concessions are illegal under Mexico's constitution, had turned off a number of potential bidders for the contracts. Nineteen companies bought packages for possible bids on the seven blocks, which include large, medium and small blocks.

Pemex was scheduled to take bids for Cuervito, a small block, the week of Oct. 20.

Companies that acquired the data packages for that block include Canada's Nexen Inc., a consortium with Brazil's Petroleo Brasileiro, and another with Argentina's Techint and a Mexican partner.

Through the multiple service contracts, Pemex hopes to add 1 billion cubic feet a day of natural gas to its production, which it aims to raise to 6.9 billion daily cubic feet in 2006 from 4.5 billion cubic feet per day at present.

Pemex said that investment in the seven blocks could amount to as much as US$10 billion.