MEXICO CITY, Jan 28 (Reuters) -

Mexican state oil firm Pemex said on Tuesday its production

of liquid hydrocarbons in December dropped 12% from a year

earlier, marking its lowest level all year and missing the

government's target for a third month in a row.

Crude and condensate production averaged 1.62 million

barrels per day (bpd) in December, down from its

November output

of 1.75 million bpd, and below the government's target of

1.8 million bpd.

Crude production hit 1.35 million bpd in December, down

13%, and marking the lowest level in more than 40 years.

Pemex, which holds a debt of nearly $100 million, as well as

over $20 billion to its suppliers, has attributed the fall in

its output to depletion across key fields and lack of major

reserve finds.

Experts and sources, however, attribute some of the lower

output to months of missed payments. The government has said it

will gradually pay off its debt with suppliers by March.

While crude processing increased 6% to 875,271 bpd in

December, refining also remained below the target of 1 million

bpd across its seven local refineries.

This includes Pemex's new Olmeca refinery, a key project to

wean Mexico off costly motor fuel imports. Last month, Olmeca

processed 43,178 bpd out of a total capacity of 340,000 bpd.

Mexico's government has repeatedly said Olmeca, which cost

more than double the initial $8 billion projections, should soon

reach its peak production levels.

The seven refineries together produced 306,807 bpd of

gasoline, 200,000 bpd of diesel and 181,405 bpd of fuel oil last

month, higher than previous levels but still far below that

needed to stop importing fuel.

Pemex said it exported 807,333 bpd of crude in December and

imported 700,788 bpd of fuel and 733.2 billion cubic feet of

natural gas.