June 20 (Bloomberg) -- Petroleos Mexicanos, the state- owned oil company, said its May oil output fell 10 percent from a year ago because of declines at its largest field, Cantarell.

Crude production was 2.798 million barrels a day, Mexico City-based Pemex, as the company is known, said today on its Web site. Output a year ago was 3.110 million barrels a day.

Mexico's government, trying to offset production declines as Cantarell dries up, needs to raise Pemex's annual budget 66 percent to $30 billion to meet output goals by 2012, Mexico's Energy Minister Georgina Kessel said in an interview on June 17. Falling output has shaved Pemex sales $10 billion a year.

Mexico, which relies on Pemex for more than a third of its federal budget, may increase production to 3 million barrels a day next year, she said. The 2009 increase would be 4.9 percent higher than this year's average of 2.859 million barrels a day.

``Petroleos Mexicanos is taking measures internally to raise production to 3 million barrels a day by the end of this year or the start of next year,'' Kessel said, without elaborating on the measures.

May daily production at Cantarell fell 34 percent to 1.04 million barrels from 1.58 million barrels a year ago. Output at the field declined 3.3 percent from April.

Production in April and part of May was hurt because of a broken pipeline at the company's Ixtal field, Pemex Chief Executive Officer Jesus Reyes Heroles said at a conference in Monterrey last month.

Cantarell, the world's third-largest oil field, represented 63 percent of Pemex's output at its peak in December 2003. The world's largest oil field is Ghawar in Saudi Arabia, followed by Burgan in Kuwait.

Congressional Debate

Mexico's Senate is more than half way through 71 days of debate on President Felipe Calderon's bill to give Pemex more freedom to hire foreign and private companies to explore, produce, transport and refine oil, freeing up funds for Pemex to increase oil exploration.

Pemex's proved reserves have fallen by almost 50 percent since 2000 to 14.7 billion barrels in 2007. The company has enough oil to produce at current rates for 9.2 years before it runs out. That figure continues to fall as the company replaced 50 percent of the oil it extracted last year.

Reyes Heroles set a goal to produce 3.1 million barrels a day last July. After the company missed the forecast in eight of 10 months, Reyes Heroles lowered the full-year forecast to 2.9 million in May.

Falling Exports

Crude oil exports fell 22 percent to 1.376 million barrels a day from a year ago. Mexico, the third-largest supplier of crude to the U.S., exports about 80 percent of its oil to its northern neighbor. The value of the exports rose 43 percent to $4.4 billion.

Mexico exported 14 percent fewer barrels in April on output declines.

Pemex's output is ``at risk'' of falling more this year, leading to further cuts in exports, Kessel said.

Imports of gasoline rose 4 percent to 346,000 barrels a day in May. Mexico, which imports about 40 percent of the gasoline it consumes domestically, needs to build a new refinery every three to four years until 2021 to become self- sufficient.

The Energy Ministry and Pemex are studying where a refinery would be built and its capacity, Kessel has said. A location and capacity will be chosen based on the lowest costs, she said.

Mexico must build a new refinery every three to four years until 2021 to become self-sufficient.

Natural-gas output rose to a record 6.851 billion cubic feet a day in May, Pemex said.

To contact the reporter on this story: Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Last Updated: June 20, 2008 16:47 EDT