| | |  Business News | October 2008 
Oil Firms Gloomy Over Mexico's Reform Prospects
 Robert Campbell - Reuters
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Mexico City – International energy companies' hopes of tapping Mexico's oil reserves are dimming as President Felipe Calderón's oil reform proposal faces dilution by opposition parties in Congress.
Energy companies had hoped to gain a toehold in Mexico's unexplored but potentially prolific deepwater territory in the Gulf of Mexico by partnering with state oil company Pemex but congressional hearings on the reform package point to a more modest overhaul of energy legislation.
“International oil companies seem to have given up on the reform being anything more that some tweaks at Pemex,” said Jeremy Martin, director of the energy program at the Institute of the Americas in La Jolla, California.
Energy companies contacted by Reuters declined to comment.
Calderón proposed a package of reforms in April to bring in foreign capital and technology to counter a steady drop in oil output which threatens Mexico's status as a major exporter and one of the government's main revenue sources.
Tampering with Mexico's decades-old barriers to direct foreign investment in the oil industry sparks passionate objections from many Mexicans, especially among leftists who are the second-largest bloc in Congress.
The centrist Institutional Revolutionary Party, or PRI, holds the decisive votes needed to pass any energy law, but while the party has backed some proposals, it has blocked others, including any overhaul of Mexico's money-losing state-run fuel refining and distribution system.
“They don't seem to be getting any major agreements on the key issues that could have something to do with private investment so that means in itself, it would be a weak reform,” said David Shields, a Mexico City-based energy analyst.
The Senate committee working on compromise legislation goes into its final consultations on Monday with a closed-door hearing on the contentious issue of incentive-based service contracts – the main mechanism in the reform package designed to attract private sector know-how to boost exploration and production.
The PRI has said it supports incentive fee contracts in principle but some negotiators have expressed reluctance to allow a substantial reduction in the traditional heavy government oversight over Pemex's spending.
CROSS-BORDER HOPE
The biggest prospect for substantial private investment in Mexico's energy sector remains in offshore oil fields lying across the Gulf of Mexico sea border with the United States.
Even nationalists are sympathetic to government warnings that not letting Pemex partner with foreign firms that have found oil just north of the sea border means crude on the Mexican side could be inadvertently sucked up by those companies' drilling projects.
Lawmakers have asked the foreign ministry for more details on the state of maritime border issues, which are set out in a bilateral treaty that Mexico wants to renegotiate, before they proceed. Yet even leftist legislators appear open to measures to prevent Mexico's border oil being siphoned away.
Optimists hope those opposed to letting Pemex use foreign partners to help it get into the costly deepwater sector might make an exception for cross-border fields.
“Don't confuse border issues with deepwater issues,” senior leftist Sen. Graco Ramirez told Reuters as he left a session of energy reform talks one evening this week.
Some analysts believe that the reform process could spur deeper changes in the medium term.
“The fact that all the players are sitting at the table discussing it is a positive development,” said RoseAnne Franco of PFC Energy in Washington, DC.
“I think after the (2009) midterm elections there could be another opportunity for more reforms.”
(Editing by Marguerita Choy) |
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