Pemex Enters Gulf Ultra Deepwater in Search of Oil

By Andres R. Martinez

Oct. 22 (Bloomberg) -- Petroleos Mexicanos has started seismic studies for oil under seas three times deeper than anything it has drilled, marking its entry into ultra deepwater as it seeks to offset an almost five-year decline in output.

Pemex, as the state-owned oil company is known, began laying seismic cables in the Gulf of Mexico on Oct. 18, according to a bulletin on Mexico's Merchant Marine Web site. The study of the area just west of the Mexican side of the Gulf's El Perdido Foldbelt will last until April and provide two-dimensional data on deposits in water as deep as 3,500 meters (11,484 feet).

``Up to now they haven't committed any money to the U.S.- Mexican border,'' George Baker, an independent energy analyst who covers Mexico, said yesterday in a telephone interview. ``They are barely getting their toes wet in deep water.''

Mexico City-based Pemex is hoping to find oil in deep waters, where the company estimates it may have 30 billion barrels of oil, to offset an almost five-year decline in output. Royal Dutch Shell Plc expects by 2010 to begin producing 130,000 barrels of oil a day on the U.S. side of El Perdido, eight miles north of the U.S.-Mexico maritime border.

Mexico's government has argued that fields such as El Perdido straddle the maritime border, and that exploration by companies such as Shell threatens to remove the oil from deposits in Mexican territory or reduce pressure, making it harder and more expensive for the state oil company to explore for crude.

So far, Pemex has drilled seven wells in waters deeper than 500 meters. While the company found oil in one well it hasn't released data to say how much it discovered. Pemex plans to drill 19 more wells in waters as deep as 1,100 meters through 2012. Ultra deepwater projects are generally 5,000 feet or more.

20 Years Later

Pemex is two decades behind companies exploring the U.S. side of the Gulf, where BP Plc made the first ultra-deepwater discovery, Kepler, in August 1987.

A ship contracted by Pemex plans to roll out a 12-kilometer seismic cable (7.5 miles). Additional lines will be placed in concentric circles to study the area, according to the Merchant Marine report.

The seismic studies are being conducted just west of El Perdido, Martha Avelar, a spokeswoman for Pemex, said in an interview without providing further details.

Pemex's oil output fell 14 percent to 2.722 million barrels a day in September. Production at Cantarell, the company's largest field and the third-largest in the world, fell 35 percent, more than twice as fast as government estimates.

Declining output is costing more than 275 billion pesos ($21.2 billion) in sales this year and threatening Mexico's budget, as 40 percent of the government's revenue comes from Pemex royalties.

Oil Legislation

Mexico's Senate energy committee passed seven bills this week, including one that would allow Pemex to hire private companies to explore and produce oil. The companies would not be able to own the oil or book reserves. Instead, they would be paid incentives to find more oil, reach production goals, use new technology or reduce costs.

Mexico nationalized U.K. and U.S. oil assets when it formed Pemex in 1938. Only Pemex is allowed to explore and produce oil, according to Mexico's constitution.

The full Senate and Congress must now consider and vote on the bills. The legislation falls short of President Felipe Calderon's original initiative, which included hiring companies to build and operate refineries.

-- With reporting by Joe Carroll in Chicago and Jens Gould and Adriana Lopez Caraveo in Mexico City. Editor: Robin Saponar, Richard Stubbe