Mexico Looks To Buck Global Oil Trend By Raising '09 Spending

Dow Jones Newswire via Rig Zone ^ | December 22, 2008 | Peter Millard

[thackney]

Oil firms from offshore Louisiana to Middle Eastern deserts are cutting back during the price collapse, but oil-hungry Mexico is spending as if the boom is just starting.

In Mexico, oil exports will run out in less than seven years at current decline rates, and the urgency to reverse the sharp fall has created a flurry of activity in Mexico's oil patch.

If Mexico manages to buck the low-investment trend hitting the global oil industry, output will stabilize or at least fall at a slower rate over the next few years. This would guarantee fiscal revenue at home and a stable source of U.S. oil imports when demand picks up again.

State oil monopoly Petroleos Mexicanos is already adding rigs, and it plans to double drilling activity next year. This month the company rolled out two tenders for a total of 1,000 wells, and plans to offer at least as many wells in a series of tenders to come out before the end of January.

Cash On Hand

Thanks to wise risk management and a political consensus to revamp the troubled industry, Pemex will not have to scrounge for funding. This month, the Energy Ministry said 2009 Pemex investments will rise 24% from 2008 to 209 billion pesos ($15.5 billion).

Back in July, Mexico used a series of put options to hedge the equivalent of two-thirds of its 2009 exports at $70 a barrel. The Finance Ministry says the institutions on the other end of these contracts are well established and will pay up, shielding Pemex's budget from spending cuts.

"The funding the (Finance Ministry) sends the state oil company for capital investment is protected," said local bank Banamex in a recent research report.

Pemex didn't reply to a request for an update on its 2009 spending plans.

[thackney]

Looks like Pemex is putting that hedge money to good use.

[thackney]

And they certianly need this investment:

Mexico Pemex 11-Month Crude Production Down 9.3% at 2.8 BPD
http://www.rigzone.com/news/article.asp?a_id=71002

Mexican oil production slid by an average of 9.3% during the first 11 months of this year to 2.8 million barrels a day, reported state-run Petroleos Mexicanos on Monday.

Exports fell by a faster pace of 17.3% during the period to 1.4 million barrels a day, the company said. Average production at the country’s largest field, Cantarell, fell 31% during the period to one million barrels a day, accounting for most of the fall in overall production.

[Venturer]

If Mexico runs out of oil they will still have their drug exports to the United States.

[thackney]

There is a demand probably not tied to general economic conditions...

[seastay]

In other news Senate Majority Leader Harry Reid and Speaker Nancy Pelosi today sent a letter to the president of Mexico, Felipe Calderón telling him the US will hold off its amnesty plans until Mexico complies and stops the drilling.