Fox: Mexico Find May Yield Plenty of Oil

An exploratory well dubbed Noxal 1 was drilled at a depth of 3,070 feet (935 meters) below the water, and is seeking a depth of 13,125 feet (4,000 meters). Perforation of the well, about 60 miles (100 kilometers) from Coatzacoalcos on the coast of Veracruz state, began in December.

"With Noxal we will begin a new era of oil exploration in our country," the president said aboard the "Ocean Worker 6 Britania" platform.

Government estimates say the find could exceed reserves at the giant offshore field Cantarell, Mexico's largest oil field, which has seen its production decline but is still expected to yield 1.9 million barrels a day this year.

Luis Ramirez, chief executive of Mexico's government-run oil monopoly Petroleos Mexicanos, or Pemex, said Noxal is the fourth deep-water well explored by Pemex.

Ramirez said that while production tests will be conducted in coming weeks, "evidence found is sufficient to infer potential reserves to be discovered that could reach 10 billion barrels of crude oil equivalent."

"This number, compared with annual production of 1.6 billion barrels of crude, shows its strategic importance," Ramirez said, adding that crude oil production at Noxal likely won't begin for eight to 10 years.

Fox said his government has invested more than US$6.3 billion (euro5.3 billion) in exploration in the last five years. Pemex expects the new find to offset further decline in production at Cantarell that is expected in coming years.

Pemex contracted a private company to drill the well. The fastest way to get the oil out would be by Pemex forming alliances with companies that have the deep-water technology. However, current laws forbid private companies from exploration and production activities in Mexico except when they are under contract to Pemex.

The Fox administration has been attempting to ease foreign investment restrictions in the state-run energy sector. But all his initiatives have been blocked by the opposition-dominated Congress.

Pemex produced 3.33 million barrels a day of crude oil last year, of which it exported 1.82 million barrels. This year, the company expects to raise production to about 3.42 million barrels a day.

Pemex hit its first deep-water oil in late 2004, when it contracted Diamond Offshore Drilling to drill a well at a depth of 681 meters (2,235 feet) in Campeche Sound, producing an initial flow of 1,200 barrels a day of very heavy crude.