CAPITAL: Mexico City

MONETARY UNIT: Peso

REFINING CAPACITY: 1.52 million b/cd

OIL PRODUCTION: 3 million b/d

OIL RESERVES: 40 billion bbl

GAS RESERVES: 63.9 tcf

Prospects for increased trade in Mexico of crude oil, natural gas, and petroleum-derived products were growing in 1997.

The Mexican Secretariat of Commerce and Industrial Development (Secofi) asked for public comment on the desirability of accelerating the elimination of customs duties on, among other commodities, crude oil, natural gas, propane, butane, ethylene, propylene, butadiene, and paraffin. Secofi was to take first quarter 1998 to study the proposed duty reductions, which faced strong opposition from Pemex.

Inconsistent decisions by Mexican commissions regarding gas pipelines and distribution contract awards were confusing outside investors. The country seemed to be having trouble reconciling existing facilities and their ownership with principles needed to attract capital for modernizations.

At yearend Mexico and the U.S. looked close to beginning talks aimed at permanently demarcating their Gulf of Mexico maritime border. This would leave no doubt as to where the U.S. Minerals Management Service could offer oil and gas leases.

MMS received bids for tracts in the western gap Aug. 26, 1997. They were to remain sealed until Mar. 3, 1998, and be returned to the companies unopened unless the gap boundaries were resolved by then.

Pemex, meanwhile, employed international standards in calculating provd reserves of 17.1 billion bbl in 39 areas of the Campeche basin. Other areas were to be re-estimated by 1999.

Upstream developments

Pemex launched a massive nitrogen injection project at its supergiant Cantarell project in the Bay of Campeche and was starting a large gas exploration program in the Burgos basin along the eastern border with Texas.

The company planned to use nitrogen injection to boost Cantarell production to 2 million b/d by 2000 from 1.24 million b/d in late 1997. Injection was to start Apr. 1, 2000.

Pemex kicked off a multiyear plan to explore and develop Burgos basin gas in northeastern Mexico. It hoped to raise production from 500 MMcfd in late 1997 to 760 MMcfd in 1998 and 1.4 bcfd by 2001, then sustain that for at least 7 years.

The number of active rigs in Mexico varied from 45 to 50 during the year.

Processing activity

Pemex planned to construct delayed cokers at its Minatitlan, Ciudad Madero, and Salina Cruz refineries to boost capability for processing heavy Maya crude.

Pemex let $390 million in contracts for two large gas processing platforms for the Akal-C complex at Cantarell in Campeche Sound.

The company restarted its Cactus, Mexico, natural gas plant damaged in a 1996 explosion that killed seven people. New plant inlet capacity is 630 MMcfd, up from 500 MMcfd.

Transportation

Mexico had a large volume of gas pipeline construction on the books in 1997, most of it onshore and a large portion associated with contracts let to outside companies for operation of gas distribution franchises in several large Mexican cities.

One exception is an 85 km, 36 in. pipeline to carry nitrogen from a $1 billion, 1.2 bcfd cryogenic plant from Atasta near Ciudad Pemex to the Cantarell offshore producing complex in Campeche Sound. The plant would be the world`s largest nitrogen complex by far.