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Pemex board to gain decision-making powers over

partnerships

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Pemex faces stagnating production, dwindling reserves,

massive

debt

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Partnerships out of favor with outgoing President López

Obrador

By Adriana Barrera and Diego Oré

MEXICO CITY, Aug 8 (Reuters) - Mexico's incoming

government will encourage state oil producer Pemex to seek

equity partnerships with private oil companies, a model out of

favor with the current president, in a bid to boost reserves

amid towering debt, according to four sources familiar with the

matter.

These partnerships would be similar to past Pemex joint ventures

with private oil producers, also known as farm-outs, that Mexico

pursued through an energy reform enacted a decade ago. That

reform allowed the oil regulator to approve private and foreign

oil companies to partner with Pemex on exploration and

production, a common practice in the international oil industry.

President Andres Manuel López Obrador stymied that reform,

however, canceling auctions for Pemex tie-ups as well as for

private producers to win blocks and operate them on their own.

Mexico's oil sector is a potential sticking point between

incoming President Claudia Sheinbaum, who takes office on Oct.

1, and her mentor and current President López Obrador.

Neither Pemex nor Sheinbaum's team responded to requests for

comment.

Sheinbaum, a scientist who worked on climate issues, is expected

to push for more renewable energy but it has been unclear what

she plans to do with Pemex, which faces stagnating production,

dwindling reserves and massive debt.

Mexico, the 11th-largest oil producer, saw its proven oil

reserves fall last year to 5.98 billion barrels from 6.12

billion barrels the year before, while crude production has

declined to nearly 1.5 million barrels per day from a peak of

3.4 million bpd two decades ago.

To help make Pemex more agile in finding partners, three

sources said the new government plans to give the Pemex board

decision-making powers over potential partners, removing the oil

regulator CNH from the process.

Farm-out deals allow partners to share the risks and rewards

of oil projects. The main current Pemex example is the Trion

field, which two of the sources said the government was studying

as a possible blueprint.

Trion, an ultra-deep field in the Gulf of Mexico, is a

partnership between Australia's Woodside Energy ( WDS ), with a

60% operating stake, and Pemex, which owns 40%. The project is

expected to begin production in 2028.

Pemex has debt of almost $100 billion, owes suppliers a further

$20 billion and has about $3.6 billion in cash, leaving it

little room for investment.

The sources did not say whether partnerships with specific

companies, or on specific fields, had been discussed.

"The idea is to expand exploration to more areas," said one

of the sources on condition of anonymity as they are not

authorized to speak publicly.

The current administration has favored contracts in which Pemex

pays companies for their services but does not give them stakes

in projects.

A greater role for the Pemex board over partnerships would

coincide with a possible scrapping of the oil regulator

altogether, if a constitutional reform promoted by López Obrador

and supported by Sheinbaum is approved.

One of the sources said Mexico's Hydrocarbons Law could also be

amended to give more power to choose partners to Pemex's board.