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Puerto Vallarta News NetworkNews Around the Republic of Mexico | September 2005 

Fox Announces New Energy Policies, Proposals in Response to Hurricane Katrina
email this pageprint this pageemail usMorgan Lee - Associated Press


Fox's reform proposals have largely been blocked by an opposition-dominated Congress.
Mexico City – Mexican President Vicente Fox on Monday announced a series of measures designed to keep energy costs down for millions of Mexicans and increase the country's energy independence.

The measures include limiting price increases on gas and electricity and reforms to allow more private investment in exploration and production of natural gas.

World energy prices have soared amid the effects of Hurricane Katrina, and Fox said Katrina not only threatened to cause significant increases in energy prices, but also could affect supplies to Mexico.

"This has made evident the vulnerability of our energy supply structure," Fox said. "The lack of deep reforms in the energy sector seriously limits the capability to take advantage of our underground natural gas."

Fox said he will propose a change in the constitution to let private companies explore for and produce Mexican natural gas that is not associated with oil fields.

Mexico, the world's sixth-largest oil producer and a top foreign supplier of crude to the United States, nationalized its oil industry in 1938 and its electricity industry in 1960. Some of the laws banning private involvement have been eased in the past 15 years, but the country maintains a complex set of rules and regulations on the private energy industry.

The government has been seeking legal reforms that would let the state oil company, Pemex, ally itself with private companies to exploit reserves in deep waters of the Gulf of Mexico, for which it lacks technology. But Fox's reform proposals have largely been blocked by an opposition-dominated Congress.

Pemex accounts for about 40 percent of the government budget and hands over more than 60 percent of its own annual revenue to the government in taxes and royalties – limiting its investment possibilities.

Fox also said on Monday he will propose a change in energy laws to permit private investment in Pemex's pipeline network. Pemex has suffered a series of leaks and deadly explosions in its aging pipeline network.

"Our energy supply structure is highly vulnerable," Fox said. "We need to remove all the obstacles that stop us from guaranteeing internal consumption of hydrocarbons, increase our exports, and reduce the imports and the dependence."

The president said a push already is under way to diversify purchases of liquefied natural gas and reduce Mexico's dependence on imports from the United States.

To limit the impact of higher natural gas prices on Mexican consumers, the government will fix a maximum reference price for distributors in September of $7.65 per million British thermal units. One British thermal unit is equivalent to about 1,000 cubic feet of gas.



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