Mexico’s state oil monopoly Petroleos Mexicanos, or Pemex, announced the approval of a new contracting model that allows for the employment of private companies to operate Mexican oilfields on its behalf. Taking advantage of a two-year old legislation that permits foreign partnerships, Pemex’s Board of Directors gave the nod for the tendering of new ‘integrated service contracts’ that seek to raise output from mature oilfields in Mexico’s southern region.     

The Mexico City-based crude producer said that the first performance-based accords for exploration and production – likely to be awarded sometime in 2011 – will be for three mature field projects in the Santuario, Carrizo and Magallanes areas. At a later stage, Pemex intends to apply the new contract model to maximize reserves from mature fields in other regions, as well as explore the deep waters of the Gulf of Mexico.

Per a 2008 reform of Mexico’s restrictive energy policy, the new contracts will enable Pemex to give performance incentives (on a per-barrel fee, plus cost recovery basis) to third party service providers. However, the company stressed that Mexico’s constitution does not allow for the grant of oil concessions to private or foreign oil companies, and that the reserves and production of hydrocarbons will remain the country’s exclusive property, even under this new service scheme.

It is expected that with the availability of the state-of-the-art technologies, Pemex will be able to offset falling output at the existing wells. The company’s crude production has dropped in recent years from nearly 3.4 million barrels a day in 2004 to less than 2.6 million barrels a day in the first nine months of 2010, largely on account of the decline at the large offshore Cantarell oilfields.

Pemex, which is targeting companies such as ExxonMobil Corp. (XOM), Royal Dutch Shell plc ( “>RDS.A )  and BP plc (BP) through the new exercise, will be able to extract more oil out of the mature fields, which is said to account for nearly 30% of the country’s proven reserves.

 
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