* Major Pemex contractor speaks publicly on violence
* Kidnappings, violence hurt natural gas operations in
* Pemex sees problem in areas where cartels prevent access
By Robert Campbell
MEXICO CITY, Sept 15 Worsening violence is
undermining energy projects in Mexico, oil services giant
Schlumberger Ltd said on Wednesday in a rare acknowledgment of
the toll a bloody drug war is taking on the energy sector.
Schlumberger, the Houston-based company that is one of
state oil monopoly Pemex's [PEMX.UL] top service providers,
blamed the drug violence for a worse-than-expected performance
by its Mexican operations in the text of a presentation to be
given later on Wednesday by Chief Executive Andrew Gould.
"The downturn in project activity in Mexico has been more
severe than we originally anticipated as customer budget
problems have been compounded with security issues in the
north," according to a copy of the speech filed with U.S.
It was an unusually blunt statement from a big energy firm,
which are traditionally reluctant to discuss Mexico's security
situation for fear of offending Pemex and the government.
But the spiraling violence, which has killed more than
28,000 people since late 2006, is increasingly affecting
operations in the natural-gas rich north of the country.
Industry sources told Reuters in August the violence had
led Pemex and the private firms it employs to scale back
drilling, maintenance and other activities at isolated sites in
the Burgos basin, Mexico's main onshore natural gas production
Pemex acknowledges security is a concern in some areas,
where well-armed cartels sometimes prevent staff or contractors
from gaining access to sites near the U.S. border.
The violence has not affected any oil production, which is
the source of a third of the federal government's revenues.
However, it has rattled private firms working with Pemex,
many of whom have stepped up security precautions and forbid
executives from spending time in parts of northern Mexico.
Schlumberger operates throughout Mexico, including in
northern states where drug violence is on the rise as turf wars
between rival cartels intensify.
Even though security is a worry, the main problem in Mexico
for Schlumberger, which drills wells, constructs production
facilities and provides services to improve output from wells,
is the slowdown at Pemex's Chicontepec project.
The company is one of the largest contractors at
Chicontepec, a Luxembourg-sized onshore area on Mexico's
central Gulf coast, where billions of barrels of crude are
locked into small geological structures that make production
challenging and costly.
A slowdown in drilling at Chicontepec has contributed to a
decline in overall drilling in Mexico, where only 66 wells were
dug in July compared to 120 a year ago.
Chicontepec output has fallen far short of targets set by
Pemex, leading to scathing criticism from regulators that the
multibillion-dollar project risks being unprofitable.
Pemex has rejected the criticism, but is slowing down work
until service companies, including Schlumberger, complete five
so-called field laboratory projects aimed at testing new
(Reporting by Robert Campbell; editing by Missy Ryan, Bernard