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Mexico's Pemex reports huge new oil finds

MEXICO CITY - Mexico's Pemex has detected vast new oil deposits in the Gulf of Mexico that could double the country's total reserves and boost its oil output to rival Saudi Arabia's, the state oil monopoly said on Monday.

The deposits -- located mainly in deep waters for which Pemex will need hefty investments and technology-sharing agreements to access -- could total about 54 billion barrels of crude equivalent (bce), which would boost Mexico's total reserves to 102 billion bce.

"This is what exploration and prospecting studies have found," Pemex communications head Sergio Uzeta said.

"It's important to be clear that we are talking about the probability of finding large quantities of oil and gas. The existence of this oil wealth is very probable but we have to confirm it so that it will be a proven matter."

Pemex's head of exploration and production, Luis Ramirez, was quoted in daily El Universal on Monday as saying that after three years of exploration at a cost of $4.55 billion, Pemex had mapped seven new offshore blocks where it hopes to extract oil and natural gas.

"This will put us on a par with reserves levels of the big players like Iraq, United Arab Emirates, Kuwait or Iran," Ramirez said.

"What's more, we would be in a position to reach production levels like those of Saudi Arabia, which produces 7.5 million barrels per day, or Russia, which produces 7.4 million."

Mexico's hydrocarbon reserves currently total 48 billion bce, including possible, probable and proven reserves. Proven reserves are 18.9 billion bce and proven plus probable reserves are 34.9 billion bce.

Mexico's crude oil production averaged 3.363 million barrels per day in July. Exports averaged 1.806 million bpd.

The potential new reserves were detected using three-dimensional seismic studies. Further studies to confirm the reserves will require technology that Pemex lacks.

ALLIANCES VITAL

A top three supplier of oil to the United States and dependent on oil exports for a third of government revenues, Mexico is counting on deep-water production to keep oil reserves from dwindling in the years ahead.

But analysts worry about how Pemex, which hands over 61 percent of its revenues to the state in taxes, will afford the investments required to drill wells 2 km (1.3 miles) deep.

Oil from deep-water reserves could cost $4 per barrel to extract, nearly double the cost of oil from shallow water.

Pemex is in talks to secure joint ventures with foreign oil companies with deep water know-how, but could face problems from a group of lawmakers who oppose letting foreign groups into Mexico's energy sector on constitutional grounds.

Uzeta said Pemex was hopeful the government could push through legal reforms to enable the technology alliances. The opposition-dominated Congress has so far blocked any attempts to let more foreign investment into the energy sector.

"The next step is to be able to determine with more certainty the existence of these resources," Uzeta said.

"To extract this oil Mexico needs to establish a technology alliance with countries that have experience. First we need to determine and quantify what we have and then we can begin the process of installing the first deep-sea wells."

Ramirez said the planned contracts would make Pemex the owner of any oil extracted, in line with Mexican law, while ensuring an attractive return on investment for any partner.

Pemex expects output from its biggest oil field, Cantarell, to start declining by 14 percent each year from 2006.

Editorial Notes: New reserves only detected on seismic surveys, yet to be proven by drilling - in deep water, to 2km. -LJ

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