Dec. 16 (Bloomberg) -- Petroleos Mexicanos, Mexico's state oil monopoly, will allow private contracts for oil well drilling for the first time next year, offering $6 billion of business to non-state companies, Chief Executive Luis Ramirez said.

The company, known as Pemex, will offer $1 billion of contracts in the first quarter to drill onshore for oil near the city of Poza Rica, Ramirez said in an interview in Mexico City. Under the contracts, Pemex will receive the oil produced at a set price and then sell it on international markets or refine it for sale as fuel.

The costs of exploration and production will be borne by the drilling companies. Mexico, which has barred foreign companies from most activities in its petroleum industry since 1938, last year began offering gas drilling contracts under similar terms.

``If we can do it in natural gas, we can do it in crude oil,'' Ramirez said in the interview following a lunch with journalists at the Museum of Technology.

Pemex will own any oil that is produced by the contract drillers. Mexico's constitution bars foreign companies from owning the nation's energy resources.

``There will be a lot of people who say no,'' as Pemex proceeds with the oil drilling arrangements, Ramirez said. ``But from a legal point of view, we're already doing this.''

The government taxes on the state oil company are equal to 60 percent of Pemex's revenue, leaving the company with little cash for investment. Pemex is seeking financing to help pay for new production and cover debt payments.

Pemex has more than doubled its debt to $37 billion from $16 billion in 1996 to help increase production of crude oil and reduce imports of natural gas and gasoline.

To contact the reporter on this story: Thomas Black in Mexico City at tblack@bloomberg.net

Last Updated: December 16, 2004 19:34 EST