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Latino Daily News

Thursday August 14, 2014

Mexico Allocates 83 Percent of Reserves to Pemex

Mexico’s Energy Secretariat said Wednesday it has assigned 83 percent of the country’s proved and probable, or 2P, reserves to state-owned oil company Petroleos Mexicanos as part of a historic energy-sector overhaul and has also granted the state-owned company 21 percent of prospective resources.

In an event in this capital, Energy Secretary Pedro Joaquin Coldwell said the area that Pemex has been assigned under the so-called “Round Zero” allocation covers 90,000 sq. kilometers (34,750 sq. miles) and contains an estimated 20.6 billion barrels of oil equivalent.

That is equivalent to roughly 20 years of production at a rate of 2.5 million barrels per day, Coldwell said.

Under last year’s overhaul, Pemex was given first dibs on crude and natural gas fields before the government holds bidding rounds open to foreign energy majors.

With the reserves and prospective resources allocated to Pemex, the company’s continued central role in the Mexican oil industry is assured, he added.

The secretary’s announcement comes just two days after President Enrique Peña Nieto signed a package of legislation to implement last December’s energy overhaul, which ended Pemex’s seven-decade monopoly of Mexico’s oil and gas business.

Congress passed those secondary laws last week with the support of the governing Institutional Revolutionary Party, or PRI, and the conservative PAN party.

Leftist lawmakers, however, say the government is surrendering the country’s natural resources to foreigners by opening the sector to private investment.

Separately, the government on Wednesday unveiled plans for its “Round One” auction, in which state-owned and private companies will bid for 156 oil and gas exploration and production blocks.

It said those blocks cover a total area of 28,500 sq. kilometers and will attract some $8.5 billion in annual investment starting in 2015.

The blocks to be awarded beginning in February of next year represent proved and probable reserves totaling roughly 3.8 billion barrels of oil equivalent and prospective resources amounting to 14.6 billion boe, Deputy Energy Secretary Lourdes Melgar said.

Of those 156 blocks, 96 correspond to exploration projects and 60 to production projects, the official said.

Pemex’s CEO, Emilio Lozoya, said Wednesday the company and the firms it partners with on oil projects will invest $76 billion over the next 10 years, with $33 billion of that total corresponding to 10 joint-venture projects with private firms, including deep-water drilling.

Mexico’s crude production has fallen by nearly a quarter from a high of 3.3 million barrels per day in 2004 due to a sharp drop in output at offshore Cantarell, formerly Mexico’s most productive field, and a lack of investment.

The energy overhaul is aimed at reversing that decline by allowing private companies to develop crude reserves for the first time since 1938.

Supporters of the overhaul argued that the participation of major multinational energy companies under profit- and production-sharing contracts and licenses is needed to develop promising deep-water reserves in the Gulf of Mexico and shale-gas resources.

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