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 News Around the Republic of Mexico | May 2008 
Hopes Fade for Mexico Energy Reforms
 Adam Thomson - The Financial Times
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When Carlos Navarrete, leader of Mexico’s leftwing Democratic Revolution party (PRD) in the Senate, stood up in at the end of last week and pronounced: “We won we won,” most of the country’s political analysts could only agree.
After a two-week occupation of the speaker’s platform, Mr Navarrete and his followers had just managed to negotiate a “national debate” on the government’s proposal to reform the ailing energy sector.
Many commentators say it is impossible to see the delay to the bill as anything but bad news for the conservative administration of Felipe Calderón, which had desperately wanted ional approval before ordinary sessions ended this week.
Denise Dresser, a political analyst in Mexico City, said: “I now hold out almost no hope for energy reform under this government.”
The country’s oil industry needs urgent reform. Pemex, the state monopoly, has been reporting a fall in daily production for about 25 years and since 2004 it has lost about 400,000 barrels per day to just under 3m b/d in November last year.
Perhaps more worrying, reserves have plummeted by 5.4bn barrels since 2000 alone and at current production Mexico has stocks worth only nine years – a fleeting moment in oil terms.
Most analysts considered the government’s proposals as “lite” to begin with and, if it is so hard to approve such a timid reform, they now ask: what is the chance of any meaningful change?
They highlight the ruling out of joint-risk contracts, in which private companies could be rewarded for a share of discoveries. Instead, the government is proposing new contracts that provide bonuses when projects go well but without sharing any of the oil.
That may make sense, given the country’s rigid constitution, which states that oil can belong only to the Mexican state, but it makes Pemex a politically highly-charged issue.
Analysts insist the proposal does not provide the sort of potential upside large international companies demand. “This is not something that the international oil industry is likely to get excited about,” says George Baker, a Houston-based consultant and expert on Mexico’s oil sector.
Political analysts in Mexico also believe the delay in passing reform caused by the debate could provide an open platform for Andrés Manuel López Obrador, the leftwing runner-up in the 2006 presidential election.
After remaining quiet last year, Mr López Obrador has seized on the oil issue with skill, insisting the government’s proposals are a wafer-thin attempt to privatise Pemex. His street protests in recent weeks have caught media attention and, so far at least, he has dominated the issue.
As Mexico prepares to spend the next two and a half months debating, a two-fold danger awaits Mr Calderón: that Mr López Obrador will capitalise on the extra time to drum up anti-reform sentiment; and that as soon as the debate ends the PRD will simply occupy again to seek further concessions and delays, with potentially dire consequences for the chances of reform.
As one high-ranking government official told the FT this week: “There is a reason passes things at 4am – because it knows that if it waits until the morning the agreement will fall apart.” |
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