Petrofac Wins Two Fields in Pemex Auction of Mature Blocks

Petrofac Ltd., a London-based oil services company, won the right to drill the two largest oil fields included in today’s auction by Petroleos Mexicanos.

Petrofac will charge $5.01 per barrel of oil produced and delivered to Pemex, as the state-owned oil company is known, for the Santuario and Magallanes onshore fields. Administradora en Proyectos en Campos SA, a Mexican company, won the right to drill a third field, Carrizo, with a bid of $5.03 per barrel at the auction held in Villahermosa, Mexico.

“The work is really only beginning,” said Carlos Morales, chief of exploration and production at Mexico City-based Pemex. “We’re very sure that in these regions there’s a very large quantity of hydrocarbons.”

Pemex is seeking to tap the technology of private companies to extract more oil from existing fields and eventually entice companies to drill in deep water with performance-based contracts that are permitted after a 2008 oil law change.

The company expects to later this year define fields for a second auction, Juan Jose Suarez Coppel, chief executive officer of Pemex, said today in Villahermosa. Pemex is considering four to nine blocks in the northern region, he said.

An auction would be scheduled after gaining board approval and setting up a data room for companies to study the fields, Suarez Coppel said.

National Interest

Drilling contracts similar to Pemex’s may become more popular as state-owned oil companies seek ways to boost production without selling reserves, said Peter Leach, Petrofac senior vice president of operations and production, today in Villahermosa.

“We know there are other countries looking at the same model,” Leach said in an interview. “It does allow them to access international skill sets, investment, training, without relinquishing their title to reserves, which is an emotive issue.”

The contracts fit well with the business model of a new unit, called Integrated Energy Services, that Petrofac created and is being run by Andy Inglis, the former head of BP Plc’s exploration and production unit, Leach said.

“They are a new opportunity and we intend to look at others of this same line,” he said of the contracts.

Schlumberger Ltd., the world’s largest oilfield-services provider, Houston-based Halliburton Co. and Spain’s Repsol YPF SA were among the bidders that qualified for today’s auction.

Production Costs

The three fields auctioned today produce a combined 13,000 barrels a day and that could surge to 60,000 with new drilling from private companies, Morales said.

The minimum investment in the fields will be $250 million and could reach five or six times that. Currently, the production cost in the fields is about $8 per barrel, which should decline with enhanced drilling techniques, Morales said.

Pemex’s board approved on Nov. 24 the first round of performance-based contracts that hand over the operation of production projects to private or foreign companies for the first time since Mexico nationalized its oil industry in 1938.

Thomas Black in Monterrey, Mexico, at; Carlos M. Rodriguez in Mexico City at

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