UPDATE 1-ANALYSIS-Pemex tax break to cushion Mexico's oil woes

(Adds final Congress approval)

By Catherine Bremer

MEXICO CITY, Sept 14 (Reuters) - A new tax break for Mexico's Pemex will be no quick fix for the oil titan's woes, but it should spur some fresh production to cushion the blow from declining yields at the Cantarell oil field.

As part of a wider fiscal overhaul worked on by ruling and opposition parties, Mexico's Congress agreed on Friday to trim a general royalty on extracted hydrocarbons and lighten the taxes Pemex pays on oil drilled at mature or abandoned fields.

The move should shave $2.7 billion off Pemex's 2008 tax bill, rising to a saving of $5 billion in 2012, and could boost daily oil output by 50,000 barrels or more in the medium term, lawmakers who worked on the bill say.

The cash will come in handy as the state-owned monopoly strives to ramp up new oil projects, with output at its ancient Cantarell field showing an annual decline of 15 percent.

"Any of this is going to be positive because it's giving them some much-needed tax relief," said Thomas Coleman, a senior oil analyst at Moody's.

Industry experts say the change could also boost Mexico's proved reserves by making it financially viable to properly explore the decades-old Chicontepec field, where oil is so hard to get at that little has been extracted.

Reserves in Mexico, the world's No. 5 crude oil producer, will last less than 10 years at current production rates.