Dec. 18 -- Petroleos Mexicanos, the largest crude producer in Latin America, may lose its 69-year monopoly on refining and pipelines as Mexican President Felipe Calderon pushes the company to stem declines in oil output and reserves.
A plan being discussed by the Senate Energy Committee would allow private companies to operate pipelines, refineries and distribute oil products in Mexico, said Sen. Ruben Camarillo, a member of Calderon's National Action Party.
Pemex's oil exploration is hampered by a lack of funds, even as crude trades near record prices, because its budget is sapped by repairs to crumbling infrastructure and taxes that take more than half of sales. Reducing Pemex's role in refining, pipelines and fuel distribution would free up cash at the third-largest crude supplier to the U.S., Camarillo said.
``There's a great opportunity for private companies to participate,'' Camarillo, secretary of the Senate Energy Committee, said in a Dec. 14 interview in Mexico City. ``Pipelines, transportation, distribution and storage are areas that are falling behind.''
Allowing private companies to play a bigger role in the state-controlled oil industry is a long-held goal of Calderon's party. Mexico's crude output may drop by a third by 2016 unless lawmakers ease rules on Petroleos Mexicanos, Energy Minister Georgina Kessel said last week.
The Energy Committee may propose changes in as many as 10 oil and gas laws, including allowing the appointment of independent board members to Pemex, said Camarillo and fellow committee member Arturo Nunez, a member of the opposition Party of the Democratic Revolution.
Proven Reserves
Proven oil reserves at Pemex cover nine years of production at current rates. The company lacks the technology to drill in fields located more than 1,500 meters below sea level, where most of Mexico's crude is.
Calderon's plan faces opposition from the Party of the Democratic Revolution, which says Pemex's taxes, at 57 percent of sales, should be cut so it can invest in production, refining and other areas. Pemex generates about 40 percent of federal revenue.
``They say there isn't enough money to invest in pipelines, refineries,'' Nunez said in a Dec. 17 interview. ``That's false. The problem is the federal government.''
Opposition may also come in the form of demonstrations. Andres Manuel Lopez Obrador, Nunez's fellow party member and a former presidential candidate, has vowed protests should the government try to ``privatize'' Pemex. He organized two months of demonstrations last year after losing the presidential vote to Calderon.
Alliances
Camarillo said the committee hasn't yet discussed amending the Mexican constitution, which bans companies other than Pemex from owning oil and gas fields. Kessel and Pemex Chief Executive Officer Jesus Reyes Heroles have said the company needs alliances to be able to explore and produce from its deepwater deposits.
``There are many companies that operate in the Gulf of Mexico that have the technology Pemex doesn't have,'' Reyes Heroles said in an interview with Mexico City-based Radio Formula yesterday.
Calderon convinced Congress to pass other reforms this year, including tax increases and pension spending cuts, with the aid of the opposition Institutional Revolutionary Party. He may also be successful with an energy bill because the drop in oil output is forcing lawmakers to act, said Roger Tissot, an energy analyst with the Washington-based consulting firm PFC Energy.
Reserves, Production
``Everybody can see the results in terms of declining production and declining reserves,'' Tissot said in a telephone interview. ``The two sides are coming to an understanding that something needs to be done.''
Calderon's party has scrapped ideas of privatizing Pemex and the Institutional Revolutionary Party and other opposition groups have accepted that allowing more private investment in the oil industry isn't equivalent to ``selling the motherland,'' Tissot said.
Camarillo said Energy Committee members agreed they wouldn't ``auction off Mexico's oil'' or ``privatize Pemex.''
Senator Francisco Labastida, president of the Energy Committee and a member of the Institutional Revolutionary Party, declined to be interviewed for this article.
Private and foreign investment in Mexico's oil and gas industry has been limited and faced court challenges brought by legislators in the past few years.
Since 2003, Pemex has hired companies including Petroleo Brasileiro SA to drill for gas in the Burgos Basin in exchange for a fee. Earlier this year Pemex, hired private companies to maintain pipelines and manage drilling in the Ebano-Panuco oil field. Some natural gas pipelines in Mexico are owned by private companies.
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