Mexico's State-Run Oil Company Prepares To Shut Down Production As Dean Approaches

Monday, August 20th 2007, 4:33 pm

By: News On 6

MEXICO CITY (AP) _ Mexico state-run Pemex oil company abandoned its offshore oil rigs in the path of Hurricane Dean on Monday, evacuating more than 14,000 workers and shutting down production in its main oil-producing region.

Hurricane Dean was projected to plow into the center of Mexican oil and natural gas production on Tuesday with sustained winds of up to 160 mph.

Petroleos Mexicanos decided Monday to remove the remaining workers from more than 100 rigs in Campeche Sound, which includes the giant Cantarell oil field. Battering waves of up to 22 feet were expected to hit the platforms, Pemex said.

Temporarily closing the 407 undersea wells that feed these rigs will mean a production loss of 2.7 million barrels of oil and 2.6 billion cubic feet of natural gas a day, Pemex said. Of that, about 1.7 million barrels of oil a day are exported from three ports in the Gulf of Mexico, where Pemex loaded the final tankers Monday morning.

Operations also were being suspended at Pemex's huge ``Floating Production Storage and Offloading'' vessel, which can store 2.2 million barrels of oil. Pemex bought it last year.

``This will be the first test of the storm-worthiness'' of the vessel, said George Baker, a Houston-based energy analyst who follows Pemex closely.

Pemex produced an average of 3.2 million barrels a day of crude oil in the first six months of 2007, of which 2.6 million barrels a day came from its offshore deposits.

Mexico was the United States' second-largest source of foreign petroleum products in May, the latest month for which statistics were available, according to the U.S. Department of Energy.

The U.S. imported 1.6 million barrels of petroleum a day from Mexico in May, down from 1.7 million barrels in May 2006. The 1.6 million barrels was slightly more than Saudi Arabia's exports to the U.S. but well behind Canada's 2.5 million barrels.

Pemex's largest single source of crude oil is the Cantarell complex of oil fields, which is one of the biggest in the world. The smaller Ku-Maloob-Zaap oil complex is located nearby, also directly in Dean's path. Together the two facilities produce more than 50 percent of Pemex's crude oil output.

When Pemex last suspended oil production, for several days during Hurricane Emily in 2005, output for that month fell 8.3 percent from the year before but affected overall annual production little.

``I think Pemex has learned a lot from the previous experience of having to shut down,'' Baker said. ``So its measures to safeguard personnel have improved. The important thing for Pemex is the protection of Cantarell.''

Despite the threat to Pemex's facilities, oil prices dropped Monday on the New York Mercantile Exchange, on expectations Dean would spare key U.S. refining facilities in the northern Gulf of Mexico.

Light, sweet crude for September delivery fell 86 cents to settle at $71.12 a barrel on the New York Mercantile Exchange. Gasoline prices dropped 10.17 cents, or 5 percent, to $1.9365 a gallon.