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UPDATE 2-Mexico oil output seen stagnant next 14 yrs
March 1, 2012 / 12:26 AM / 6 years ago

UPDATE 2-Mexico oil output seen stagnant next 14 yrs

* Mexico oil production at 2.8 mln bpd through 2026

* With investment, output could reach 3.35 mln bpd (Updates with details on largest fields)

MEXICO CITY, Feb 29 (Reuters) - Mexico’s oil production is seen stagnating at around 2.8 million barrels per day (bpd) over the next 14 years unless the state oil company Pemex significantly boosts investment, the energy ministry said in a report on Wednesday.

The world’s No. 7 oil producer currently produces 2.55 million bpd of oil, as Pemex has managed to stabilize a dramatic decline in production at its largest aging fields, most notably the giant Cantarell field.

Pemex has struggled to replace lost output with new discoveries and risks becoming a net oil importer within the next decade as energy demand rises.

By 2026, Cantarell’s production will drop to 150,000 bpd from the 444,000 bpd this year, the energy ministry report said.

Since Cantarell’s decline, the Ku-Maloob-Zaap (KMZ) complex has become Mexico’s most important oil field.

KMZ will produce 847,000 bpd this year -- 32.5 percent of Mexico’s overall output.

By 2017, KMZ’s production will peak at 933,000 bpd and then began to decline, the report said.

Just to keep production at around 2.8 million bpd for the next decade and a half will require investments of 292.333 billion pesos ($22.86 billion) per year.

In a best-case scenario -- with 21 percent more investment -- Mexico could be producing 3.35 million bpd by 2026, the report said.

The additional funds would go towards better technology to boost recovery at Cantarell and KMZ as well as at mature fields.

This would also allow Pemex to expand exploration in deep waters off the Gulf of Mexico to reach a production goal of 1,367 million bpd by 2026.

A 2008 oil reform opened up the nationalized industry to more private investment and last year Pemex launched the first round of historic oil field operating contracts for several mature fields in southern Mexico.

The company plans to award 22 more contracts for mature fields later this year but major oil companies are more interested in the potential for more lucrative deep water projects.

To attract the biggest international players Pemex may have to offer more incentives to take on the risky drilling projects, even though changes will likely have to wait until after presidential elections later this year.

Allowing foreign oil companies bigger profits in Mexico’s energy sector is a sensitive issue for Mexicans who take pride in the 1938 nationalization.

But the frontrunners in the presidential campaign have floated the idea of constitutional changes that would further open up the industry to outsiders.

Pemex funds much of its operations through issuing debt and regularly operates at loss because of its heavy tax burden.

Taxes gobbled up nearly 60 percent of the company’s total earnings in the fourth-quarter since the government relies on oil resources to fund around a third of the federal budget.

$1 = 12.7905 pesos Reporting by Mica Rosenberg; Editing by Lisa Shumaker and Bob Burgdorfer

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