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Chevron outlines plans Mexico oil tap

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Oil tap: Chevron asks Mexico for permission to tap Gulf

Upstreamonline.com: Chevron outlines plans Mexico oil tap

By Upstream staff

Chevron has submitted proposals to tap deep-water oil and natural gas reserves in Mexico to the government in Mexico City as the country weighs up its options to stem declining output.

Chevron wants to make Mexico “a big part of our portfolio,” said Ali Moshiri, who oversees the company’s exploration and production portfolio in Africa and Latin America.

So far, Chevron’s proposals have not borne fruit because Mexico’s constitution bars foreign oil companies from producing hydrocarbons, Moshiri told Bloomberg.

Those restrictions probably will not change until state-owned Pemex relaxes its monopoly and pressures politicians to change the law, Moshiri said.

“The biggest problem in Mexico is Pemex,” Moshiri said.

He said Pemex needed to be more proactive and it should learn to ask for help.

Mexico has 12.4 billion barrels of untapped oil reserves, or 10% of the world’s crude, according to the US Energy Department. The country’s reserves are declining because most formations in the Mexican section of the Gulf of Mexico remain unexplored, the department said in a December report.

“The opportunity in Mexico is very vast and we just need the door to be opened to us,” Moshiri told the news agency. “If you look at Latin America as a whole, Mexico has been way behind any other countries, including Venezuela, which at least is open for us to do business in. In Mexico, we don’t even have access to exploration, not even high-risk exploration, or production.”

Chevron’s proposals to the Mexican government involve plans for deep exploration in the Gulf of Mexico and to tap natural gas deposits neglected by Pemex, Moshiri told Bloomberg.

Mexican crude output decreased 15% since peaking at 3.45 million barrels a day in December 2003, according to the nation’s energy ministry.

Underinvestment and industrial accidents have hampered efforts by Pemex, to find new reserves and maximise development output.

“Mexico has been closed for so many years that all that’s been explored is 250 feet of water in the Gulf of Mexico, while on the US side of the Gulf we’re exploring in 10,000 feet of water,” Moshiri said.

Chevron holds the record for the deepest well ever drilled in the Gulf of Mexico, Knotty Head, which plunges 30,589 feet beneath the sea floor.

The company’s $1.4 billion Blind Faith project in 7000 feet of water about 160 miles south of New Orleans is scheduled to being pumping oil this year, followed by the $4.7 billion deep-water Tahiti project, also in the Gulf, in 2009.

Chevron considers Brazil, Mexico, Colombia, Venezuela and Trinidad and Tobago its brightest prospects for future Latin American investments. Ecuador and Bolivia hold no attraction for the company, Moshiri said.

On 3 April, Mexican President Felipe Calderon told bankers at a conference in Acapulco that he was optimistic opposition lawmakers would eventually agree to relax controls that have kept Mexico off-limits to international petroleum companies.

Pemex has already signed technology-sharing agreements with Chevron, ExxonMobil, Shell, StatoilHydro, Petrobras, Nexen and Maersk Oil & Gas.

Calderon favours changing secondary laws rather than the constitution to loosen Pemex’s monopoly and allow greater foreign company participation. Moshiri said that will not work.

“You’re not going to ask a major oil company to come there for an itty-bitty project,” Moshiri said. “We’ve got opportunities elsewhere. Changing the constitutional ban on foreign ownership of Mexican petroleum resources is crucial to enticing international companies,” he said.

Brazil’s state oil company, Petrobras, approached Mexico last year about forming partnerships on energy projects and was rebuffed, Pemex chief executive Jesus Reyes Heroles said last week.
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08 April 2008 22:24 GMT  | last updated: 09 April 2008 07:15 GMT

http://www.upstreamonline.com/live/article151991.ece

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