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 Business News | December 2007 
Mexico Senators Begin Pemex Reform Talks
 Noel Randewich - Reuters
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Mexico City - Mexican senators began hammering out a modest reform of the struggling energy sector this week, possibly loosening the barriers to private-sector participation.
A proposal for energy reform could be made in Congress when it convenes in February, ruling party Sen. Fernando Elizondo and other lawmakers told Reuters.
They ruled out drastic changes to allow full foreign investment in the industry, but some senators said the reform could give state oil monopoly Pemex more freedom to team up with foreign state-run companies,
"We will likely consider the issue of strategic alliances, particularly in deep water and cross-border oil deposits," Elizondo, of the National Action Party, or PAN, said before a meeting with members of the Senate's energy commission.
Past attempts at energy reform have faltered at the drawing board, mostly due to fears by many Mexicans of foreign ownership of the oil industry, nationalized in the 1930s.
Mexico is facing a double headache of declining output and proved oil reserves that have shrunk to just nine years' worth of output.
Pemex, whose profits go directly to the government to make up for the country's low tax base, lacks the technology to explore deep waters in the Gulf of Mexico where seismic tests indicate huge oil reserves might be found.
Many experts say Mexico needs to lift a decades-old ban on direct private investment in energy in order to modernize Pemex, but President Felipe Calderon lacks an absolute majority in Congress and opposition parties are against the idea.
Letting Pemex form strategic partnerships with private firms, which could drill or explore for oil on behalf of the state-run firm, is seen as one way around the constitutional ban, but some opposition legislators oppose even that.
"We will not change the constitution, nor will we support or authorize risk-reward contracts," Sen. Francisco Labastida, head of the Senate's energy commission and member of the Institutional Revolutionary Party, or PRI, told Reuters.
Lawmakers have mulled oil-sector alliances consisting of fee-paying service contracts - which the constitution allows - sweetened with a share in profits, but keeping Pemex as owner of the oil and gas.
The energy reform will likely include measures to make Pemex more efficient, reduce corruption and make its directors more accountable, Elizondo said.
Industry experts say Pemex's goal to keep oil output at 3.1 million barrels per day until 2020, while restoring reserves and starting deepwater production by 2013, is unrealistic.
A Pemex overhaul is one of several economic reforms experts say Mexico badly needs to help compete against fast-developing countries like China and India.
"This problem has to do with the stability of public finances and the economy, and therefore economic growth and employment," Labastida said.
In September, opposition lawmakers agreed to a long-awaited tax overhaul to boost Mexico's flimsy tax take.
Although far short of what experts say is needed to shore up government finances, Calderon is taking advantage of the momentum of his success with tax reform to to push for improvements to the energy sector and labor laws. (Reporting by Noel Randewich, editing by Matthew Lewis) |
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