Dwindling Quickly

Crude oil reserves in Mexico's huge but waning Cantarell oil field will continue to decline this year at around the same pace as in 2007, Pemex Director General Jesus Reyes Heroles said on Tuesday.

Reyes Heroles told Reuters average daily production at Cantarell, in the Gulf of Mexico, would drop by 200,000 barrels over 2008, increasing pressure on the state-owned oil monopoly to ramp up output at smaller oil fields.

The decrease would be a drop of 16 percent from Cantarell's December 2007 output of 1.26 million barrels per day (bpd), its lowest level of the year. Yields at Cantarell declined 16 percent during 2007, slightly more than forecast.

Reyes Heroles told an engineering event Pemex aimed to keep its total crude output at around 3.1 million bpd by increasing production at other fields. But to maintain that level beyond 2012 would require higher investment over the next few years.

The Mexican government is raising Pemex's investment budget for 2008 by around a third to roughly $20 billion, after a $2.8 billion tax cut agreed last year. Pemex will spend nearly $2 billion on exploration and around $13 billion on production.

Within that, Pemex will pump some $2 billion into Cantarell to seek small pockets of oil, and will spend more than $1 billion to increase production at the nearby Ku Maloob Zaap complex, said Vinicio Suro, head of investment projects at Pemex Exploration and Production.

"It's an important project, we are going upwards, everything's going well," Suro told reporters. He said the goal was to raise output at KMZ to 780,000 bpd within the next two or three years from roughly 600,000 bpd today.

Pemex is also working to expand output at Chicontepec, a technically tricky sprawl of onshore fields.

Mexico is one of the four top oil suppliers to the United States, which relies on it as a politically stable source.

While it grapples with a decline in total output since a 2004 peak, Pemex also is under pressure to shore up declining crude reserves. It lags behind foreign oil companies of its size in getting exploration projects going in deep water.

President Felipe Calderon is keen to attract more private capital to the oil sector and has lawmakers discussing changing the law to let Pemex form private partnerships in specific areas, such as cross-border oil fields in the Gulf of Mexico.

Senators from two main parties say they could agree an energy reform during the Feb. 1 to April 30 congressional session, but they face opposition from leftists who stand against loosening barriers to private investment in oil.

Cantarell, the former jewel of Mexico's oil industry, accounted for two-thirds of the country's crude output for years, but now makes up just 43 percent of the total.