(Corrects date of interview in third paragraph.)

July 2 (Bloomberg) -- Petroleos Mexicanos awarded its first service contract to a private company, for managing drilling in the Ebano-Panuco field, as the state-run company seeks ways to halt a production decline.

Pemex, as the company is known, awarded a 10-year contract to a group led by Mexico's Grupo Diavaz to run the oil field with a goal of more than doubling production to 15,000 barrels per day, said Carlos Morales, chief of Pemex's exploration and production unit. Pemex plans to offer four more oilfield-service contracts this year, he said.

``We haven't done anything like this,'' Morales said in a June 29 interview during a conference in Veracruz. ``These are similar to the contracts we've done in natural gas.''

The value of the contract wasn't disclosed.

Pemex, the third-largest oil supplier to the U.S., is seeking to maintain crude-oil production at 3.1 million barrels per day and add proven reserves equivalent to 100 percent of production over the next six years.

Pemex's daily oil production has fallen every year since reaching a high of 3.38 million barrels in 2004 as output declines accelerated at its Cantarell offshore field. Last year, Pemex produced 3.26 million barrels of oil a day as Cantarell's output tumbled 12 percent to 1.79 million barrels a day. This year, Pemex forecasts Cantarell will produce 15 percent less.

Chicontepec

Results from the contract for Ebano-Panuco, which was first tapped more than seven decades ago when foreign companies operated in Mexico with few restrictions, will be used to determine whether the practice is extended to a region known as Chicontepec, Morales said.

Chicontepec, which comprises thousands of oil pockets tucked in the rugged terrain of southeastern Mexico, is one of two areas the company hopes will make up for the decline at Cantarell, Morales said. The other area is a group of offshore fields known as Ku-Maloob-Zaap. Pemex hasn't pumped much oil from Chicontepec, which was first discovered in 1926, because the region requires the use of specialized technology.

The contracts for oil drilling in so-called mature fields such as Ebano-Panuco will test whether private companies can boost oil production in areas that have languished because of higher drilling costs. Pemex expects the private companies, with more flexibility in their operations, to increase daily production from a group of about 10 mature fields by 200,000 barrels from 75,000 barrels now in about four years, Morales said.

The companies will oversee Pemex union workers at the fields and will submit a drilling program each year to Pemex for approval, Morales said.

``The specialists here have to have a focus in this area,'' he said. ``They have to have very low costs.''

Natural Gas

Contracts with private companies to drill in northern Mexico for natural gas that's not found with crude oil helped Pemex increase daily gas production to 5.36 billion cubic feet last year from 4.42 billion cubic feet in 2002. For the first five months of this year, gas production has averaged 5.87 billion cubic feet per day.

Pemex began offering contracts for drilling for natural gas in the Burgos Basin in 2003 to companies including Brazil's Petroleo Brasileiro SA. A group of senators, led by former Senator Manuel Bartlett, asked the Supreme Court to rescind the contracts, saying they violated Mexico's Constitution, which puts the state in control of hydrocarbon production.

Pemex stopped offering new contracts in 2005 while the court considered the challenge. The court subsequently upheld the contracts, and Pemex resumed offering gas contracts this year.

To contact the reporters on this story: Thomas Black in Monterrey at tblack@bloomberg.net

Last Updated: July 2, 2007 12:17 EDT