Pemex Agrees to Performance Contracts With Petrobras, Repsol

Petroleos Mexicanos, the state-owned company, is converting some service contracts into performance- based agreements as it seeks to boost natural-gas production.

Pemex is replacing contracts with companies such as Spain’s Repsol YPF SA (REP) and Brazil’s Petroleo Brasileiro SA at the Burgos natural-gas field to give companies more independence and potential cash bonuses, said Energy Minister Jordy Herrera.

The companies “want to obtain a better consideration of their costs, to be able to expand activity to extract more gas from those fields,” he said in an interview in Mexico City.

The original contracts, signed in 2003, have been amended as costs to develop each well rose to be about 10 percent higher than similar fields in Texas, according to a Pemex presentation. The Burgos field is near the border with Texas in the northern Mexican state of Coahuila.

“The new contracts would clear up all the accounting fog that made it so difficult for the companies to project costs and revenue,” George Baker, a Houston-based energy consultant who publishes the Mexico Energy Intelligence newsletter, said in an interview from Houston.

Pemex is seeking help to produce more gas as it fails to maintain its output goal of 7.5 billion cubic feet per day. The company’s gas production fell to a 5-year low of 6.4 billion cubic feet a day in September, the Energy Ministry has said.

“The lawyers are telling us that by the first quarter of next year we might have the changes required to make this migration,” Herrera, who is also the chairman of the Mexican state oil producer’s board, said in Mexico City.

To contact the reporter on this story: Carlos Manuel Rodriguez in Mexico City at

To contact the editor responsible for this story: Dale Crofts at

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