Oct. 8 (Bloomberg) -- Petroleos Mexicanos’s board will meet on Oct. 15 to discuss whether the state-owned oil company should continue investing in the $11.1 billion Chicontepec oil project, said board member Fluvio Ruiz Alarcon.

Suspending investments at Chicontepec “is a complicated issue, because the investment plan was approved and it’s already in course,” Ruiz Alarcon said. “We’ll need to learn how far the commission’s mandate reaches.”

Ruiz Alarcon, who spoke in a telephone interview, was responding to a report today by daily newspaper El Universal that said the nation’s National Hydrocarbons Commission had ordered the onshore project be shut down because of inefficient drilling.

Mexico’s Energy Minister and Pemex chairwoman Georgina Kessel and board member Ruiz Alarcon have said Chicontepec needs to be reassessed. Ruiz Alarcon said in May that Pemex is too “optimistic” about the field, where the company pumps about 30,000 barrels a day of oil, below a targeted 40,000 barrels.

Mexico needs to reevaluate how to proceed with the project, Juan Carlos Zepeda, head of the country’s Hydrocarbons Commission, said today in a telephone interview. Pemex started Chicontepec without the proper technology, he said.

Incentive Contracts

The commission will recommend Pemex renegotiate drilling contracts to pay with incentives that depend on results, Zepeda said. The commission’s findings are a recommendation and aren’t mandatory.

“Current contracts will continue to be executed,” he said.

Weatherford International Ltd., the world’s biggest provider of artificial-lift services, earlier today fell as much as 7.5 percent in New York trading after El Universal reported that Mexico ordered Pemex to suspend drilling at Chicontepec. The stock dropped 1.1 percent to $18.61 in New York.

The Hydrocarbons Commission will send Pemex a final Chicontepec recommendation by year-end. Mexico’s Energy Minister could decide to make the recommendation mandatory for Pemex, Zepeda said.

“I have the perception that Pemex is not aware that they need to relaunch the technology program for Chicontepec,” he said.

Suspend Drilling

Future drilling contracts should be suspended until Pemex creates a technology development plan, Zepeda said.

Mexico City-based Pemex, as the state-owned oil company is known, will have to revise at least eight exploration contracts worth almost $2 billion, newspaper El Universal reported earlier today, citing Zepeda.

There are “certainly doubts” about Chicontepec’s profitability and the technology that should be used, Pemex Chief Executive Officer Juan Jose Suarez Coppel said on Sept. 10. He took the helm of Latin America’s largest oil producer a month ago.

The company is turning to Chicontepec, which stretches across the Mexican states of Veracruz and Puebla, and deepwater offshore projects to offset the fastest drop in Pemex’s output since 1942. The production decline is costing the government 300 billion pesos ($22.4 billion).

August output from the Chicontepec field fell to 30,706 barrels a day. Pemex previously said it expected a “jump” in August production at Chicontepec by about a third to 40,000 barrels a day, and 60,000 by year’s end.

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

Last Updated: October 8, 2009 19:33 EDT