UPDATE 1-Mexico's Pemex to tap external markets for 2010 funding

(Updates with CEO quotes, background on capital spending, incentive contracts)

NEW YORK, Nov 19 (Reuters) - Mexico's state oil company Pemex will likely tap external markets to raise funding for projects in 2010 as it seeks to hold oil output steady at 2.5 million barrels per day, the company's CEO said on Thursday.

"We have plans to raise funding for 2010," Pemex Chief Executive Juan Jose Suarez said at a conference in New York organized by the U.S.-Mexico Chamber of Commerce.

"We're talking around $3 billion."

Pemex relies heavily on debt to fund its capital spending programs due to its crushing tax burden, which takes most of the company's revenues.

Mexican oil production has slumped by about 25 percent since peaking in 2004 due to declining output from the giant Cantarell field and a lack of large new discoveries.

The company expects production to slip to 2.5 million bpd in 2010 but Mexican energy officials have said they are confident that production will not fall below this level in coming years due to signs the rapid rate of output declines at Cantarell is easing.

Mexico produced 2.599 million bpd in September.

Pemex expects to invest approximately $18 billion next year in new oil wells, exploration and engineering work on a new refinery, in line with its spending in 2009, Suarez said.