CAPITAL: Mexico City

MONETARY UNIT: Peso

REFINING CAPACITY: 1,525,000 b/cd

PRODUCTION: 3,048,100 b/d

OIL RESERVES: 47.8 billion bbl

GAS RESERVES: 63,456 bcf

Mexico was at the forefront of efforts to shore up world crude oil prices during the year, but prices of many crudes reached single digits in the fourth quarter.

Mexico pledged at year-end to extend its output cuts, made under an accord with Saudi Arabia and Venezuela, throughout 1999. Mexico said it would reconsider its stance if OPEC opted not to extend its cuts.

Upstream developments

Pemex Exploration & Production in mid-1998 divulged plans to rejuvenate Mexico`s main producing provinces and reevaluate some less-explored areas.

The Burgos basin, containing 38% of the country`s proved gas reserves and about 2,800 wells, was undergoing a large revitalization program.

Pemex said Burgos production would reach 970 MMcfd by year-end 1998, up from 700 MMcfd in June and 238 MMcfd in 1994. Mexico`s total gas production averaged 4.759 bcfd in first half 1998, 31% above the same period in 1994.

Meanwhile, Pemex E&P let a $250 million gas compression contract to a Westcoast Energy Inc. group related to Pemex`s $5 billion plan to boost Cantarell oil and gas production in the Bay of Campeche. Cantarell accounted for 40% of Mexico`s oil output.

Pemex ran as many as 65 rigs in mid-1998, but the count fell back to about 50 late in the year, Baker Hughes figures showed.

Processing activity

Pemex Refinacion Co. let a contract for fluid catalytic cracking equipment for the 235,000 b/cd Cadereyta refinery near Monterrey by mid-1999. The company also let design and license contracts for FCCUs proposed for the Salina Cruz, Tula, and Minatitlan refineries.

Pemex moved forward with secondary petrochemicals privatization, agreeing to sell by competitive bidding a 49% stake in its petrochemical plant at Morelos. It is the first of seven plants in which Pemex hoped to sell a minority share.

Morelos, newest of Pemex`s petrochemical plants, started up in 1994. It is just outside heavily industrialized Coatzacoalcos.

Transportation

Mexico decided not to consider lifting its tariff on naturalgas imports until after 1999. The North AmericanFree Trade Agreement called for elimination of the 5% tariff by 2003, and some had urged Mexico to end it early.

Unitsof PemexandEl PasoEnergy agreed in principle to link their pipelines at the U.S.-Mexico border, providing another conduit for gas trade. Pemex was to take 185 MMcfd of gas over 10 years, with the link to be in service in early 1999.

Comision Federal de Electricidad signed a 10-year contract worth about $1 billion to buy up to 300 MMcfd of natural gas from San Diego`s Sempra Energy International for the Presidente Juarez power plant at Rosarito, Baja California.

Dynamic expansions were beginning in the country`s gas distribution sector, with contracts awarded for service to many large and medium sized cities. Mexico also signed several independent power production contracts.