MEXICO CITY--Mexico on Wednesday set aside the bulk of its
currently active oil fields for Petróleos Mexicanos but said
private companies will be allowed to bid on four-fifths of
prospective resources as the government ends the national oil
firm's seven-decade monopoly.
Officials hope that the bidding, starting as soon as next year,
will spark an energy boom.
Pemex's chief executive said the new competition will help the
company, making it more efficient. "Pemex has been waiting for
these changes for decades," CEO Emilio Lozoya said in an interview
at its headquarters here. "We're committed to making sure that
Pemex continues to be not only the largest company in Mexico, but
to regain the largest spot in Latin America and be also one of the
leaders worldwide."
Pemex lost the top spot in Latin America a few years ago to
Brazil's Petróleo Brasileiro SA. Revenue for Petrobras was $141
billion last year, compared with $123 billion for Pemex.
Such heady talk might seem misplaced coming from a company that
is widely regarded as overstaffed, riddled with corruption and has
seen its production slide by nearly a million barrels a day over
the past decade to a current 2.5 million.
But Mr. Lozoya, a 39-year-old former investment banker, said
Pemex has plenty of reason to be optimistic. He said Pemex has
already talked to hundreds of oil companies about prospective joint
ventures and hoped to open the first bids for such tie-ups by the
first quarter of next year.
"Pemex and its management team are thrilled and very energized,"
he said.
The company will begin life in a competitive market with a major
edge. Mexico's government said Pemex would be allowed to keep 83%
of the country's proven and probable reserves, which include
current oil fields and discoveries awaiting development. It will
only keep about a fifth of prospective resources, which include
as-yet-undiscovered deposits. Pemex had asked for 31% of
prospective resources in its request to the government.
The most promising part of fields to be explored for oil, and
most appealing to major U.S. oil companies, are in the deep waters
of the Gulf of Mexico. Pemex has no deep-water production in the
Gulf, where major oil companies have been highly successful on the
U.S. side of the waterway.
The areas up for grabs by private companies include a broad mix,
from deep waters to mature fields and nonconventional reserves such
as shale gas. The government said it had identified 109 blocks for
the first round of bids. It expects investments of around $50
billion over the next four years, including partnerships with
Pemex.
Juan Carlos Zepeda, president of the National Hydrocarbons
Commission, said the goal of the first round of bidding is to give
a quick boost to the country's stagnant oil production.
The extent and scope of the areas to be offered in the first
round show that the government wants to move as quickly as possible
and make it as broad as possible, said Tim Samples, a professor at
the University of Georgia who follows the Mexican oil sector. "It
looks ambitious, I wasn't expecting such a broad array of
projects."
Pemex's share of proven and probable reserves is around 20.6
billion barrels of crude oil equivalent, or 15.5 years of output at
current production levels, said Lourdes Melgar, Mexico's deputy
minister for hydrocarbons.
Mr. Lozoya, the Pemex chief, said the company likely will invite
other oil companies to work on at least 10 big projects to which it
has exclusive rights, something it was unable to do under previous
laws. Those projects include mature fields and deep-water projects,
among others.
Exxon Mobil said it welcomed the new announced steps. "We will
pursue potential investment opportunities in Mexico that are
competitive with other opportunities around the world," said
spokesman Patrick McGinn.
While it lacks the financing or technology to pursue areas like
deep waters, Pemex has a natural advantage in that it knows
Mexico's subsoil geography. It also has a staff that had been
hamstrung by Mexican laws that previously gave the government veto
power over Pemex investments and created a focus on its role as a
cash cow for the government. Pemex funds about a third of
government spending.
While Pemex is interested in developing its expertise in
producing oil and gas from shale-rock formations, it isn't an area
that the firm will invest in quickly.
Shale projects are best done by "more agile," smaller companies,
Mr. Lozoya said. "Pemex won't be a leader in shale gas in the next
three years," he said.
But Mr. Lozoya left the door open to creating or acquiring a
nimble shale subsidiary for exploiting oil and gas, perhaps in a
partnership with a private firm. He also said Pemex is open to
doing joint ventures with U.S. companies involved in producing
shale gas in the U.S. to gain experience.
In the past, Pemex was burdened by the costs of unprofitable
projects that the company carried out because the projects were
deemed necessary for reasons of national development policy. That
has now changed. "Our objective is to make money," said Mr.
Lozoya.
Under laws signed this week by President Enrique Peña Nieto,
Pemex will have more autonomy over its budget and can work with
private companies.
Mr. Lozoya said the changes would enable the company to cut
costs in many areas. Pemex, for example, now can work with private
companies to build pipelines. That will result in huge savings for
the company, which has been forced to truck some of its crude and
refined products because of a lack of infrastructure, he said.
José de Córdoba in Mexico City and Daniel Gilbert in Houston
contributed to this article.
Write to Laurence Iliff at laurence.iliff@wsj.com and Juan
Montes at juan.montes@wsj.com
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