LA MURALLA IV, Gulf of Mexico — The computer screens lining the bubblelike control room on this giant floating platform monitor pressure levels in a narrow shaft cut through bedrock to a reservoir of valuable natural gas three miles below sea level.
For six months, an international team hired by a contractor for Petróleos Mexicanos, Mexico’s state-owned oil monopoly, has been drilling an exploratory well here. Now, the work is nearly done. Drill pipes are stacked like sentries. An underwater robot has been pulled back up from the deep seafloor. A wireline sensor is gathering data to determine how much oil and gas lie below.
An operation like this would attract little attention in the northern part of the gulf, where dozens of deepwater platforms are part of the mosaic fueling America’s energy boom. On the Mexican side, though, the search is just beginning.
Pemex is counting on a future in deepwater production. But after eight years of exploratory drilling, it is still years away from producing the first barrel of oil in deep waters. Before it can, Pemex must shed its past as a lumbering state monopoly and remake itself as a streamlined company ready to compete or ally with the world’s biggest firms.
“The real large fields, the material opportunities for Pemex, lie in deep water,” Emilio Lozoya Austin, the chief executive of Pemex, said in an interview in Mexico City. “This is where our biggest learning curve lies.”
Mr. Lozoya’s ambitious plans are part of a sweeping overhaul of Mexico’s energy sector intended to increase flagging oil and gas production. By ending Pemex’s monopoly, the government hopes to attract serious outside investment for the first time since Mexico kicked out foreign oil companies in 1938.
Within a year, Mexico’s regulator, the National Hydrocarbons Commission, will hold the country’s first open auctions for oil and gas fields, including deepwater regions in the Gulf of Mexico. And Pemex will have to compete in the bidding just like any other company, either alone or with partners.
“Pemex will not have any special privileges at all,” said Juan Carlos Zepeda, the president of the hydrocarbons commission. “We have two main mandates. One is transparency and the other is competition.”
The change will not be easy for Pemex, long run as an arm of the government. For decades, the company’s task has been to pump oil and provide cash for the Mexican government, a job made possible by generous discoveries in the shallow waters of the southern gulf in the 1970s. The result was that Pemex racked up losses and never invested for the future — when the easy oil would run out. Closed off from the global industry, it fell further and further behind the energy giants.
Now, Pemex is venturing into uncharted territory, as its traditional fields decline. Since the peak in 2004, Mexican crude oil production has fallen by about a million barrels a day to an expected 2.35 million barrels a day this year.
“The tendency was for the government to look for the quick win and not have a very diversified portfolio of investment that would give you the short-term barrels, the medium-term barrels and the long-term barrels,” Mr. Lozoya said. “Obviously, the short-term barrels have been declining very quickly.”
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As Mexico’s energy overhaul kicks into high gear, Pemex has neither the financial capital nor the expertise to produce oil and gas from its complex deepwater reserves. That includes the deepwater oil that the company has discovered in the Perdido Fold Belt, a deposit that extends across American and Mexican waters, or these natural gas fields further south, where the Mexican contractor Grupo R has been drilling exploratory wells with Pemex.
Similarly, Mexico has watched the shale gas boom in Texas from the sidelines. Its own deposits from the same Eagle Ford geological formation, called Agua Nueva in Spanish, are dormant because the small exploration companies working just miles across the border were excluded from Mexico by Pemex’s monopoly.
Mr. Lozoya’s priority for deep water next year is to attract partners to begin production at two fields, Trion and Maximino. He acknowledged that the companies that had developed deepwater fields on the American side of the gulf were “clear candidates.” Among those are major corporations like Exxon Mobil, Chevron and Shell.
Mr. Lozoya is also seeking partners for other types of deposits, including mature fields or extra-heavy offshore crude. That would allow Pemex to increase production quickly as it focuses on its deepwater strategy.
Private investment in oil and gas production is forecast to rise steadily each year to reach about $27 billion by 2020. “The potential in Mexico is still huge,” said Luis Miguel Labardini, an oil consultant at Marcos y Asociados in Mexico City. “There are going to be findings where Pemex can’t do the work.”
The government has granted Pemex a comfortable cushion of reserves, enough to produce at its current level for two more decades. But it must get to work fast in deep water, because the laws return any new field to the state if commercial production does not begin within five years.
“Now you have a credible threat,” Mr. Zepeda said of the hydrocarbons commission. “Before the reform, if Pemex was not performing, I could not take the area and give it to someone else.”
Mr. Lozoya, 39, who has a background in corporate turnarounds and was appointed in December 2012, is in a hurry. “I think it’s something that can definitely be achieved in less than a decade,” he said of Pemex’s transformation.
But he faces serious challenges. Pemex has had chief executives from the private sector in the past who tried and failed to thin the thicket of interests that allows contractors, union leaders and managers to get rich off the enormous wealth the company generates.
Pemex’s reputation for corruption is one of investors’ main concerns, said Deborah Byers, a managing partner at EY consulting in Houston. “The No. 1 issue that everybody has said we need is complete transparency.”
Mexican prosecutors are investigating one of Pemex’s largest contractors, the politically connected marine services company Oceanografía, over accusations of a $400 million bank fraud scheme involving fake Pemex invoices. Pemex has not explained why it gave so many contracts to Oceanografía, a financially shaky company with no experience outside Mexico.
To tighten control over Pemex’s $40 billion contract operations, Mr. Lozoya has centralized them in one department. He predicts this move will save the company $1 billion this year.
And Pemex has trouble managing its sprawling industrial properties — from refineries to the franchises that operate its signature green and white gasoline stations — that bleed money and attention from the company’s exploration and production division. The company has lost $1.15 billion this year to criminals’ tapping into its pipelines, a longtime problem.
Mr. Lozoya argues that Pemex has taken the most important step in a turnaround. “We have stopped talking about barrels,” he said. “We only talk about U.S. dollars and pesos now. It’s not about volumes. It’s about value.”
