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Sun 1 Oct 2006 12:00 AM

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Brazil offers to help Mexicans

Mexico, a top US supplier, faces declining crude production

Brazil’s state-owned oil company, Petrobras, has said it wants to forge a partnership with its Mexican counterpart, Pemex, for deep-water oil exploration and production.

The move could reverse declining production in Mexico—one of the United States top suppliers.

While Mexico shares the oil-rich Gulf of Mexico with the United States, it is unable to explore it due to lack of technology and experience in deep water production.

International firms until now have shown little interest in working with Pemex as they are banned from production sharing agreements with Mexico’s state-owned monopoly.

Under-investment in Mexico’s oil industry for decades has resulted in falling output, which is matched by Venezuela’s slowing production.

They are two of the top three suppliers to the United States, which is trying to wean itself entirely off Middle Eastern oil.

Its main supplier is Canada.

But Petrobras has stepped in to help out.

‘’We’re ready to take on risks as we already have all the knowledge in deep waters,’’ Petrobras Chief Financial Officer Almir Barbassa, said. “It would make total sense to work together with Pemex.’’

Pemex sees deep-water exploration as the long-term answer to replacing reserves and output, particularly as its main oil-producing Cantarell field, which provides 60% of its production, has started to decline.

Mexico’s president-elect, pro-free market Felipe Calderon, said he was interested in learning about deep-water exploration and production from Petrobras, which has vast experience in the area.

Petrobras is familiar with the Gulf of Mexico after successfull drilling in US waters.

But Mexican law prohibits private or foreign companies from ownership of any oil or gas concessions.

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