Bloomberg News

Pemex Director Sees Congress Approving $28 Billion Spending

July 27, 2011

(Adds expected private investments in eight paragraph.)

July 27 (Bloomberg) -- Petroleos Mexicanos, Latin America’s largest oil producer, expects to receive at least $27.5 billion from the finance ministry to fund new investments once Congress approves its spending plan later this year, a director said.

The Mexico City based company, which is asking Congress for a record 331 billion-peso budget ($28.4 billion) next year, expects about 320 billion pesos once lawmakers vote on the plan on Nov. 15, board member Fluvio Ruiz said today in an interview.

“I don’t want to be extremely optimistic expecting that we’ll get the full amount of our request, but at least we should get 320 billion pesos,” Ruiz said from the Mexican capital.

Pemex is seeking funds to expand offshore in southeastern Mexico and stem production declines after output slumped six years in a row. The company is aiming to replace 100 percent of its proven reserves next year, compared with 81 percent in 2010. Production dropped to 2.576 million barrels a day in 2010, the lowest daily average since 1990.

The company’s investment budget for this year was 286 billion pesos. That amount, approved by Mexico’s Congress in November, fell short of the 300 billion pesos originally sought.

Ruiz expects that the budget proposal will avoid major cuts because it has clear objectives for the funds and it’s supported by a 5-year-business plan. The plan, reviewed every year, was created after changes to Pemex law amid a 2008 energy reform.

Ruiz is one of the four independent members added to the board of Pemex on 2009.

Private Investments

Private investments in the Mexican oil industry are also expected to grow “significantly,” Ruiz, 44, said. The new performance-based contracts may bring “tens of billions of pesos in investments,” from next year, he said.

Pemex is counting on new performance-based contracts with foreign operators to boost output in older fields and is also exploring for crude in deep waters in the Gulf of Mexico. It will award the first round of the contracts next month, before offering a second round that may include offshore fields for the first time, Carlos Morales, the company’s head of exploration and production, said in a June 9 interview.

Pemex is expected to report second-quarter results tomorrow. The company posted a profit of 4.21 billion pesos in the first-quarter, the highest quarterly net income since June 2008.

--Editors: Dale Crofts, Robin Saponar

1232z MM <Equity> CN WFT US <Equity> CN HAL US <Equity> CN SLB US <Equity> CN

To contact the reporter on this story: Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net.

To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net


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