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Pemex bets hinge on Cantarell
Debra Beachy Petroleum News contributing writer
Major oil companies eager to partner with Mexico’s state-owned oil monopoly Pemex in deepwater offshore exploration may be in for a long wait, industry observers say.
Mexico’s giant producing Cantarell field, off the coast of the Yucatan Peninsula in the Gulf of Mexico, holds the key to whether the country will take the politically painful step of altering its constitution to allow that to happen. No one knows for sure how long Cantarell can continue to produce at its current rate of 2 million barrels a day, except perhaps Pemex reservoir experts, and they’re not talking, said oil consultant George Baker, owner of the Houston-based firm Baker & Associates.
“The future of Cantarell is the subject of conjecture on both sides of the border,” Baker said. “How long can it produce 2 million barrels a day? Five years? Ten years? No one knows how long.” Cantarell, discovered in the 1970s, now provides Mexico with two-thirds of its crude production.
Mexico’s constitution currently bans foreign ownership of Mexico’s oil wealth, and oil companies would be loathe to share deepwater technology without getting to share in production.
“It takes five to six years to develop a major oil program, and Pemex has no ability to explore in deep water. There is a political under-investment,” Baker said, adding that the political will must exist in order to establish the regulatory and legal framework for joint ventures. Opposition to change in Mexico Yet in Mexico, there is continuing opposition not only to changing the constitution to allow such joint ventures with Pemex to go forward, but also to maintaining the current levels of Cantarell production. Recent natural gas contracts with foreign oil companies that paid the companies fees instead of a share in production also have sparked protest.
At a recent ceremony marking the 66th anniversary of the nationalization of Mexico’s oil industry, Cuauhtemoc Cardenas Solorzano, a leftist political leader and son of the Mexican president who nationalized the oil industry, accused Mexican President Vicente Fox of trying to sell out the country to foreign oil companies, according to the Mexico City daily La Jornada.
“There shouldn’t be any ceremony marking this day, because no one is defending this country’s sovereignty,” Cardenas said. He also was critical of Pemex’s increase in Cantarell’s production level, saying it only hastens the day when Cantarell will run dry.
Meanwhile, Pemex is increasing its budget for production and exploration for 2004. According to Pemex, the company will spend $12 billion on capital expenditures this year, with 79.4 percent going to production and 13.3 percent to exploration.
Pemex also has started a program to build 47 new drilling platforms. While Pemex pays about 61 percent of its revenues to the government in taxes, much of the money it spends on exploration comes from bank-financed loans.
“It’s a major commitment,” said Baker of the budget. “It’s not in Pemex’s power to change the political, regulatory and legal environment to put in place everything needed to replace Cantarell.”
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