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Mexican oil reserves show slight drop.

MEXICO CITY: Mexico's proven crude oil reserves showed a negligible drop in 1999 from the previous year, though the giant Cantarell offshore project should keep output capacity on an upward climb in coming years, said state oil monopoly Petroleos Mexicanos (Pemex) on Saturday.

Proven oil reserves as of Jan. 1 were 34.103 billion barrels, a bare decline from 1998's 34.180 billion, said Pemex in a report on last year's performance.

But this drop paints a misleading picture of the country's production. Last year, Mexico's output reached an all-time high of 3.308 million barrels per day (bpd) and the Cantarell project promises a jump in capacity within two years, said Pemex chief Rogelio Montemayor in a speech.

"For the first time in its history, Pemex has an unutilized production capacity that, in the context of the deep swings in world prices, provides a strategic advantage in negotiations," Montemayor said, speaking at the 62nd anniversary celebration of the nationalisation of Mexico's oil wells.

Cantarell, located in the southern state of Campeche, involves a large-scale nitrogen injection plant to help recover pressure in the oil field, Mexico's largest.

Montemayor said the goal for this year's average capacity from Cantarell is 1.467 million bpd, a figure that will rise to 2.223 million bpd by 2002.

The project will be about 60 percent finished by the end of the year, Montemayor added. The company has said previously that the nitrogen plant will come in on line in April.

Once the facility is running, Mexico's oil production capacity is expected to rise to about 3.3 million bpd from 3.2 million, according to the Energy Ministry.

Mexico is currently producing about 3 million bpd -- below capacity because of its participation in a set of year-old OPEC supply cutbacks that were designed to lift sagging world oil prices.

At the anniversary festivities, Pemex also typically releases a report on its previous year's performance.

This year's report showed that Mexico's combined proven and probable reserves totalled 46.24 billion barrels, down about 40 million barrels from the previous year, Pemex added.

Pemex added that its earnings before taxes in 1999 were 206.665 billion pesos ($22.2 billion), a 34 percent increase from the previous year, Pemex said.

After taxes, the oil and gas company posted a loss of 1.437 billion pesos, it said. Pemex earned 2.649 billion in 1998, according to the report.

The company also said its revenues were 319.81 billion pesos, a 28 percent jump from 1998 due mostly to a three-fold increase in oil prices over the past year.-Reuters