Pemex Expects `Important' Increase in 2011 Capital Investments, CFO Says

Petroleos Mexicanos, Latin America’s largest oil producer, expects to have an “important” increase in capital investments next year, the company’s chief financial officer said.

Pemex, as the Mexico City-based company is known, may get 300 billion pesos ($23.7 billion) for next year’s investments, CFO Carlos Trevino said today on an earnings conference call. Pemex expects to spend about 230 billion pesos by year-end, Trevino said.

“It’s still too soon to have a better projection for the next year,” he said.

State-owned Pemex presented a 2011 budget proposal of 400 billion pesos, Hector Moreira, a company board member, said July 19. After the ministry’s evaluation, the 2011 proposal will be submitted to Congress and scheduled to be voted on by Nov. 15.

So far this year Pemex has invested 92 billion pesos, or 40 percent, of its 2010 investment budget, Trevino said.

The company also asked the finance ministry to reduce its taxes next year and to adjust a cost limit for exploration and production, Trevino said, without elaborating. If the changes are approved, Pemex’s capital-expenditure budget may be increased to close to 350 billion pesos, Trevino said.

Pemex plans to offer its first oil exploration and production contracts under a revised law as soon as September.

Performance-Based Contracts

“These contracts we’re preparing to launch in the following months, this September or October at the latest,” Carlos Morales, head of the exploration and production unit, said on the call. The first contracts will apply to reactivated reserves at wells that had been closed, Morales said.

Pemex’s 2011 budget includes projects to increase cash flow and improve efficiencies, Trevino said, without elaborating.

“We see this favorably as long as Pemex’s budget prioritizes investment,” David Penchyna, one of two ranking members from the Institutional Revolutionary Party in the lower house, said yesterday in an interview at Bloomberg’s Mexico City office. “We want a clear, sharp proposal from Pemex that focuses on investment and cuts operating expenses.”

To contact the reporter on this story: Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net.

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