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WRAPUP 4-Mexico awards 2nd round of mature oil field contracts
* Four contracts awarded, two declared void
* Future rounds likely delayed by election
By Noe Torres
MEXICO CITY, June 19 (Reuters) - Mexico's state oil monopoly Pemex on Tuesday awarded four contracts to drill mature oil fields in the second round of bidding to open up the country's nationalized oil industry to more private investment.
Pemex put six different areas in northern Mexico up for auction where several oil fields have been tapped by the company but are in decline. Two auctions were declared void.
More than a dozen companies or consortia were in the running for the contracts and Pemex chose the winners based on who could produce the most oil at the lowest cost per barrel.
The goal is to increase crude output at the fields by around 140,000 barrels per day (bpd) from the 13,000 bpd they are pumping today.
Mexico launched the new incentive-based contracts after Congress passed a historic 2008 energy reform to lure private capital into the country's lagging energy sector.
Boosting oil output from the world's No. 7 producer is critical after Mexico lost nearly a quarter of its capacity between 2004-2009 due to the rapid aging of its largest oil fields and a lack of investment in exploration for new deposits.
Since then, oil output has stabilized around 2.55 million bpd, but a renewed decline is a worrying prospect for the government that relies on oil revenues to fund around a third of the federal budget.
The first batch of contracts for mature fields further south were announced last year and are now in operation.
Tuesday's auction awarded contracts to drill four new onshore areas: Altamira, Panuco, San Andres and Tierra Blanca.
But the auctions for two offshore areas - Atun in the shallow waters off the coast of Veracruz and Arenque offshore Tamaulipas state - were unsuccessful.
"It's a disappointing result from the point of view that one of the most interesting aspects of this bidding round was the offshore blocks," said Mexico-based energy expert David Shields. "Something went wrong. Pemex's expectations and the companies' expectations did not coincide."
NEXT ROUNDS SEEN DELAYED
Oil major Chevron and Spanish energy firm Repsol took part in the auction but did not win contracts.
Egyptian company Cheiron Holdings Ltd won the contract for the Altamira area in Tamaulipas, where Pemex has drilled 87 wells but only 25 wells remain in operation, Pemex said.
The Panuco area in Veracruz went to a joint bid from oil services company Schlumberger and British drilling firm Petrofac.
Petrofac said the contract, which runs for 30 years, should be signed by August this year and operations at the area could begin in 2013. The companies committed $17.5 million in investment at the Panuco fields for the first two years, Petrofac said in a statement.
A consortium of Monclova Pirineos Gas, a company with Venezuelan and Colombian capital, and a unit of Mexico's Alfa won contracts for the Tierra Blanca and San Andres areas, both in Veracruz.
Pemex has plans for a third and fourth round of contracts this year at the geologically complicated Chicontepec project and deep water areas in the Gulf of Mexico.
But with a presidential election around the corner on July 1, and the main opposition party way in the lead, most observers say the future rounds are likely to be delayed.
Industry experts say many major oil companies are waiting for the potentially more lucrative contracts in Mexico's Gulf.
Deep waters could hold around 29 billion barrels of oil equivalent, or more than half of Mexico's potential resources.
However, luring companies into risky and more expensive deep water projects under the current contracting scheme - which pays bonuses based on performance but does not allow for ownership of oil and gas - could be difficult.
Mexico's constitution bars outside exploitation of the country's oil resources, making joint ventures or profit sharing with private companies virtually impossible.
The candidate leading the election race, Enrique Pena Nieto from the centrist Institutional Revolutionary Party, or PRI, has promised to take bold steps to deepen energy reform, floating the idea of introducing a constitutional reform.
But if he wins, Pena Nieto will face tough barriers to changing Pemex even as the company buckles under a heavy tax burden and a bloated workforce.
"Future rounds of new performance-based contracts will enter an impasse," said Carlos Ramirez of the Washington-based Eurasia group in a research note.
The mere possibility of oil reform under a new administration will push companies and Pemex to "to adopt a wait and see strategy," he said.
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