Mexico curbs oil output, cites US refinery damage

MEXICO CITY: Mexico's state oil company said it is temporarily reducing oil production because US refineries damaged by Hurricane Ike have canceled or delayed shipment orders.

Petroleos Mexicanos, or Pemex, said it lowered output by 250,000 barrels a day on Tuesday. But the company said Wednesday that it expects production to be back to normal by the end of the week as refining capacity along the Texas Gulf Coast recovers.

Pemex produced an average of 2.75 million barrels a day in August, the latest available output figure. The reduction comes as Pemex is already struggling with sagging production. Falling output helped cut exports to 1.43 million barrels a day during the first eight months of 2008, down 16 per cent from the year-ago period.

Oil income makes up about 40 per cent of Mexico's annual budget. Hurricane Ike shut down or reduced work at more than a dozen refineries on the Gulf Coast of Texas. Seven of those refineries process crude from Mexico. Pemex's storage capacity has been saturated because the refineries have not been able to receive Mexican oil shipments.

Pemex said the arrival Wednesday of two oil tankers with a combined shipping capacity of 950,000 barrels would reduce the pressure. Five other tankers were expected to arrive Thursday and Friday.

Pemex's inventories stand at 13 million barrels. Separately, Pemex announced it had closed five wells in Veracruz state due to severe flooding in the region. The wells produce 1,561 barrels of oil a day.

Pemex spokeswoman Georgina Saavedra says the wells will remain closed until flooding recedes and heavy rains stop. Veracruz Civil Protection said it expected the rains to continue for another seven days.