MIAMI, March 4 (UPI) -- Mexico has allocated more than 170 new sites for petroleum development amid falling production in its traditionally bountiful Cantarell oil field, where officials have revised production estimates for the year to reflect the forecast for further decreasing output.
Typically the second-largest supplier of oil to the United States, Mexico has seen production drop, prompting a relook at oil-sector investment.
The announcement of new development sites by the Mexican state-run energy company Pemex was heralded by Veracruz Gov. Fidel Herrera Beltran, who said the new sites' opening comes at an opportune time as the Mexican government late last year passed a reform bill allowing some foreign investment in the country's oil and gas sectors.
"It is a great time to invest in Mexico in areas that were closed or not open before," Beltran said during a recent international petroleum conference in Houston, according to Voice of America.
However, some major restrictions on the sector remain. Mexican law prohibits Pemex from entering into profit-sharing ventures with other companies -- a condition that could dissuade some foreign oil companies from investing the billions of dollars it would take to develop the new sites.
For Beltran's Veracruz, a state along the Gulf of Mexico with vast potential for additional offshore oil drilling, an easing of the restrictions on foreign profit-sharing would greatly improve Mexico's chances of capitalizing on its untapped oil wealth. Pemex currently lacks the expertise and capital to reach most major oil deposits offshore.
Experts estimate there are 30 billion barrels or more beneath the floor of the Gulf of Mexico, a bounty that could single-handedly save the Mexican oil industry amid falling output at its once leading oil field, Cantarell.
On Tuesday Pemex announced that the Cantarell oil field would produce 700,000 barrels per day, down from a previous estimate of 756,000 bpd.
And with the once robust production from Cantarell no longer a given, Mexico could be headed toward ending its run as a net exporter of oil and be forced to import petroleum to meet its energy needs at home.
Mexican President Felipe Calderon meanwhile would like to open up the energy sector to foreign investment, but he faces stiff opposition from some lawmakers who expressed concerns that the country's oil profits would wind up in the hands of outsiders.
Partnership issues regarding Pemex are widely considered the third rail of Mexican energy law as its profits account for a large portion of the country's budget and fund most of its social projects.
Coupled with production shortfalls, reserves in Mexico are running out faster than previously thought, according to oil experts and Mexican energy officials. As it stands, Pemex does not have the expertise necessary to drill in deep water for the estimated 30 billion barrels or more believed to be beneath the floor of the Gulf of Mexico.
That means Calderon somehow must convince opponents that opening up the sector to foreign companies for exploration would benefit both Pemex and Mexicans in the long run, though intense opposition to foreign exploration will prevent that, some experts said.
"If the company continues to face declining oil revenues caused by lower-than-expected production and/or oil prices, legislators will be increasingly reluctant to allocate large shares of limited fiscal resources to the company," said Allyson Benton, a Latin America analyst with the Eurasia Group.
