Oct. 30 (Bloomberg) -- Petroleos Mexicanos, the state- owned energy company, lowered its forecast for daily production this year by 3.6 percent after hurricanes and stormy weather interrupted output.

Pemex, as the Mexico City-based oil company is known, said in a report today that production will be between 2.7 million and 2.8 million barrels per day. The company had forecast daily production of 2.8 million barrels in July and began the year with an estimate of 3.1 million.

The company is betting that an increased exploration and production budget and Congress' recent approval of President Felipe Calderon's oil bills to allow the company to hire private companies for certain work will lead to an increase in output and reserves.

``The reform is going to permit us to widen exploration in deep waters, allowing us to speed up development of reserves in that area,'' said Carlos Morales, Pemex exploration and production chief, on an earnings conference call with analysts today.

Mexican legislators approved energy reform measures on Oct. 28 that would let Pemex hire private companies to explore and produce oil under contracts that reward them for finishing projects earlier or finding more oil. The companies would be prohibited from owning the oil or booking reserves.

Falling Production

For the first nine months of this year, daily crude oil production fell 9.7 percent to 2.82 million barrels compared with a year earlier, costing the company more than 270 billion pesos ($21 billion) in lost revenue. The energy ministry has said Mexico has 30 billion barrels of reserves under waters deeper than 500 meters (1,640.5 feet).

Losses at the company's refinery and petrochemical units and higher cost of sales as production fell combined to cause a third-quarter loss of 14.4 billion pesos. Third- quarter sales rose 26 percent to 317.9 billion pesos on higher oil prices.

The loss widened from 13.7 billion pesos a year ago even as taxes as a percentage of sales declined to 48 percent from 61 percent the third quarter 2007, Pemex said on Oct. 28.

The refining unit lost $1.85 per barrel of crude oil it refined because of higher international oil prices compared with a margin of $4.50 a barrel a year ago.

Refining Losses

During the first nine months of the year, the refining business lost 70.7 billion pesos. Pemex's petrochemical unit lost 13.9 billion pesos in the same period.

The company cut oil output by 250,000 barrels a day on Sept. 23 as U.S. refiners lowered demand as they struggled to restart plants because of Hurricane Gustav and Ike. Mexico sold 85 percent of its exported crude to the U.S. in the third quarter.

Pemex forecast natural-gas production will be between 6.7 and 6.8 billion cubic feet per day this year, mostly because its Cantarell field is producing more gas associated with crude oil. The company doesn't have facilities to cope with the surge in gas, forcing it to burn of 19 percent of gas output during the third quarter.

Pemex said it expects to reduce the burn-off in the fourth quarter with the installation of compression and re- injection equipment at the field. As a result of burning more gas, the company's emissions of sulfur oxides jumped 36 percent from a year ago to 2.97 tons per thousand tons.

Rising Investments

The company said it has spent 57 percent of its estimated $217.9 billion pesos ($19.4 billion) capital expenditure budget for 2008 as of the end of September.

Pemex's 2009 investment budget will rise to 220.7 billion pesos, according to a congressional budget proposal that still requires approval.

Pemex increased the number of drilling rigs it operates by 8.5 percent from a year ago to 242. Of those rigs, Pemex owns 113, the company said. The number of offshore drilling platforms also increased to 226 from 215.

To contact the reporter on this story: Thomas Black in Monterrey, Mexico, at tblack@bloomberg.net and Andres R. Martinez in Mexico City at amartinez28@bloomberg.net

Last Updated: October 30, 2008 15:56 EDT