Oil Service Firms to Bid for Massive Drilling Contract in Mexico

State oil monopoly Petroleos Mexicanos (Pemex) is spending heavily to halt a collapse in production that threatens to erase the country's exports in less than seven years.

It will take Pemex around a month to pick a winner for the three-year contract to drill 500 wells in the geologically difficult Chicontepec basin. The deadline for bids is Thursday.

The losers will have other opportunities. Pemex also has a Feb. 26 bidding deadline for another 500-well contract in the same area. Pemex officials have said this year the company will roll out contracts for an additional 1,500 wells at Chicontepec.

Weatherford International Ltd. won the two most recent Chicontepec contracts in mid-2008 by bidding $870 million for a total of 600 wells, and is competing for the new work. Industry executives said the Weatherford bids came in around 25% below those of its competitors, adding an element of uncertainty as bids come in this week.

Some potential bidders have said they won't offer Pemex bargain rates.

"The two other Chicontepec tenders are coming up soon," said Baker Hughes CEO Chad Deaton in a recent conference call. "We don't want them for what they [cost] last time. If we can get them and make money on them then yes, we'll tender them," he said.

Weatherford has run into complications at Chicontepec, with Pemex saying it will fine the company for falling behind on the 2008 drilling schedule.

Author: Ksenia Kochneva