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Mexico's Pemex in a corner after oil find boast

MEXICO CITY - A boast by Mexico's Pemex that it may have spotted new deposits big enough to double its oil reserves has put fresh pressure on the state energy monopoly to finalize joint ventures needed to access the deposits.

Without a deal with an oil major willing to share its deep-water drilling technology, any new deposits will remain out of reach, and so will Pemex's claim last week that it could hike output to rival Middle Eastern oil giants.

And with the opposition-dominated Congress likely to block any fresh attempt by the government to axe a law against foreign companies extracting Mexican oil, analysts say Pemex's boast was painfully premature.

"You don't have anything unless you have a drill bit," said analyst George Baker at U.S. consultancy Mexico Energy Intelligence, after Pemex Exploration and Production head Luis Ramirez said unconfirmed deep-sea reserves could amount to a colossal 54 billion barrels of crude oil equivalent.

"You can't show there's a barrel of oil there unless you drill for it. And Pemex can't do that without associates. The expertise (for deep-water drilling) is not for rent," Baker said.

Without a change to Mexican law to allow a risk-sharing joint venture, the most Pemex could offer a deep-sea partner would be an unappetizing fixed-fee outsourcing contract, like the service contracts it has with foreign firms in the Burgos gas basin.

Analysts see few oil majors likely to share their precious deep-sea know-how for anything less than a full joint venture giving them a decent stake in any potential oil windfall.

Even the Burgos service contracts are being challenged in court by opposition lawmakers who are thus bound to also fight any risk-sharing deep-sea joint ventures Pemex might attempt.


Pemex has turned more circumspect since Ramirez's comments created waves on Monday, saying only that a "significant potential had been recognized" in deep waters of the Gulf of Mexico and stressing it had not altered its reserves data.

Pemex has also declined to comment on an unsourced newspaper report saying a deep-sea technology accord was in the works with oil giant Royal Dutch/Shell and is refusing any interviews on the subject.

"They are being very secretive. They don't want to make waves before anything is concrete," said a source close to Pemex.

Pemex, which lacks both the technology and the funds to drill down to depths of 2 km (1.3 miles) or more, has been talking to oil majors like Shell, ExxonMobil, BP, Total, Unocal Corp, Statoil and Petrobras, industry sources say.

But the veil of secrecy hanging over the negotiations is frustrating industry watchers, especially after Ramirez's remarks on the oil potential buried in deep-sea fields.

"Pemex has generated a great big scandal internationally with the news that there's a 'potential' of 54 billion barrels of oil in this area," wrote independent energy analyst David Shields in an editorial.

"They are totally hypothetical figures, there's an infinity of doubts about the size and certainty of reserves that could exist in the deep Gulf. What's more Pemex would need to totally reinvent itself to be able to develop this type of reserves."

Even if Pemex can enlist deep-sea partners - and Energy Minister Fernando Elizondo has said he will push for a change in the law in the months ahead - it would be five to seven years before it could draw any oil from the new fields, analysts say.


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