NEWS

[MEXICO] Mexican reform bill “falls short"

2008-06-02T10:44:00.001+02:00

A new Mexican oil bill aimed attracting deepwater oil companies and their supply trains is too contradictory to work despite “incentive-based” contracts and lower taxes, judging by a Dow Jones report.

The agency reported Pemex president Jesus Reyes Heroles as saying the new bill would attract new partners for his state-run company. But he qualified his optimism and reportedly said the reform bill proposed by President Felipe Calderon falls short of what Mexico needs to quickly tap today’s high oil prices.

In visits to Oslo and other oil capitals, successive Mexican energy ministers have repeated pleas for technology and oilfield investment.

Mexian oil production fell in April by nine percent to a nine-year low of 2.87 million barrels a day.

Source: Scandinavian Oil & Gas

[ENERGY STOCKS] ExxonMobil shareholders meet

2008-05-28T18:08:00.005+02:00

Energy stocks dipped on Wednesday as oil prices cooled off, with petroleum and natural gas shares extending losses for the second straight day this week.

The Amex Oil Index (XOI: 1,562.75, -2.98, -0.2%) subtracted 0.8% to 1,553, with Hess Corp. (HES: 121.79, -4.21, -3.3%) down 3% to $122.10 and Valero Energy (VLO: 49.00, +1.53, +3.2%) gaining 3.5% to $49.14.

The Amex Natural Gas Index (XNG: 705.71, -0.64, -0.1%) fell 0.8% to 701. Component Chesapeake Energy (CHK: 51.99, -1.20, -2.3%) dropped 2.5% to $51.85. Southwestern Energy (SWN: 44.18, +0.35, +0.8%) rose nearly 2% to $44.69.

The Philadelphia Oil Service Index ($OSX: 337.84, +0.89, +0.3%) dropped 0.9% to 334, falling back from gains in the previous session. Component Halliburton (HAL: 47.88, -0.24, -0.5%) dropped 1.5% to $47.38. Schlumberger (SLB: 100.69, -0.34, -0.3%) fell 1.7% to $99.34. Crude oil prices subtracted $1.48 to $127.37 on the heels of a slack Memorial Day driving weekend in the U.S. See Futures Movers. Even so, gasoline prices remained at the record level of $3.94 a gallon for the second day, according to the AAA Daily Fuel Gauge Report.

Among stocks in the spotlight, ExxonMobil (XOM: 89.65, -0.15, -0.2%) fell 31 cents to $89.49 ahead of its annual shareholders meeting. Some shareholders are calling for the separation of its chairman and chief executive officer and for the oil giant to spend more of its billions on alternative energy research.

Chairman and CEO Rex Tillerson currently holds both jobs. The company's management opposes the measures, which are non-binding. Descendants of John D. Rockefeller, the founder of ExxonMobil predecessor Standard Oil Corp., and a variety of institutional investors in the U.S. and abroad have lined up behind the separation proposal, which drew the support of 40% of shareholders at last year's meeting.

PEMEX's E&P subsidiary has awarded Baker Hughes' (BHI: 87.94, +0.46, +0.5%) a $469 million contract to drill and complete wells, according to federal procurement Website cited by a research note Wednesday by Pritchard Capital Partners. The fields are all in the Gulf of Mexico off the coast of Tabasco state. Work is due to begin on June 30 and run nearly two years. Baker Hughes fell 0.8% to $86.70.

Frontier Oil (FTO: 29.83, +0.89, +3.1%) rose nearly 5% to $30.30. The company drew an upgrade to peer perform from underperform at Bear Stearns. Basic Energy Services (BAS: 28.12, -0.55, -1.9%) dropped 2.4% to $27.97. The company was downgraded to neutral from buy at UBS.

In the alternative energy arena, Verenium Corp. (VRNM: 2.40, +0.03, +1.3%) said it'll hold a dedication ceremony on Thursday for its demonstration plant in Jennings, La. The demonstration plant is rated to produce 1.4 million gallons of ethanol per year using enzymes to convert non-food biomass into fuel. The Cambridge, Mass. company said it's on track to begin construction in the middle of next year on a 30 million gallon per year commercial plant, which will be the first of its kind. Shares rose 2% to $2.42.

Source: MarketWatch|by Steve Gelsi

[NORTH AMERICA] The mexican President, Felipe de Jesus Calderón pleads for energy reform

2008-05-26T23:31:00.003+02:00

Mexican President Felipe de Jesus Calderón issued a desperate plea to Congress at the weekend to approve his energy reform proposals after figures showed that oil production had slumped to a nine-year low.

The rapidly declining production in one of the world's top 10 oil-producing nations comes amid a global supply crunch that has sent the price of international crude to records in recent weeks.

On Friday, PEMEX, Mexico's state oil monopoly, reported that April average daily production had fallen to 2.77m a day compared with 2.85m the previous month and 3.18m barrels in April 2007.

According to PEMEX, production at Cantarell – one of the world's largest oil complexes, which accounts for roughly half of Mexico's total daily output – has shrunk 24 per cent in the past 12 months alone.

The latest data highlight the increasing difficulties faced by PEMEX, which has long suffered from insufficient funds for exploration, ageing existing fields, and Mexico's constitution, which prohibits it from entering joint-risk contracts with third parties.

"The rate of decline is much quicker than we had anticipated," Jordy Herrera, under-secretary for energy, told the FT this month.

The situation for Mexico, which relies on oil revenue to fund about 40 per cent of total government income, has been made worse by the fact that proven reserves have also been deteriorating so fast that the country could become a net oil importer within a few years.

A recent study published by the energy ministry and PEMEX, showed that the country's total proven reserves had plummeted from 20.1bn barrels equivalent in 2002 to just 14.7bn barrels last year.

On Saturday, President Felipe de Jesus Calderón told an audience in the coastal resort of Acapulco: "My government has presented a proposal to make PEMEX, stronger, more transparent, with greater operational and technological capacity and, importantly, to stop falling production."

One of the main ideas is to give PEMEX, greater flexibility to associate with third parties and, at the same time, to give private companies working with PEMEX, financial incentives linked to performance. Most analysts view the proposed changes as a tepid reform and woefully short of what Mexico needs to turn the situation around. But even this proposal has faced stiff opposition in Congress.

Ordinary sessions ended on April 30 without any sign of progress, and leftwing members of the opposition have since managed to force a so-called national debate. The debate, which began on May 13 and is scheduled to last for 71 days, includes legislators, experts and other members of Mexican society.

However, industry analysts fear the delay diminishes the chances of a reform being approved.

Source: Financial Times|By Adam Thomson

[NORTH AMERICA] Mexico April crude oil exports tumble. PEMEX

2008-05-24T01:45:00.002+02:00

Mexico's oil exports fell sharply in April and production also slipped, putting pressure on the government to overhaul energy laws as the country's biggest oil field declines.

State oil company PEMEX said on Friday that exports dropped to 1.439 million barrels per day during April, down nearly 12 percent from March levels. Exports this year through April are down 13 percent from the same period last year.

The April data comes as Mexico's left-wing opposition is holding up in Congress an oil reform proposal by conservative President Felipe Calderon aimed at increasing private sector involvement in oil to help boost exploration and production.

Mexico is the world's No. 6 producer of oil by volume and the No. 10 exporter, according to the U.S. Energy Information Administration, but years of underinvestment by past governments have left output and reserves declining.

Skyrocketing oil prices have more than cushioned the blow to federal finances, about one third of which come from PEMEX taxes, but the decline in production is worrying for the United States, which depends on Mexico as one of its top oil suppliers.

Oil output fell in April to 2.767 million barrels per day, remaining below the firm's 3.0 million bpd target for the seventh straight month. Average production over the first four months of the year is down 9 percent from the same period in 2007, PEMEX said.

Mexico has long relied on its huge Cantarell offshore oil field to be the workhorse of its oil industry.

But the field has been declining rapidly in recent years, and Pemex's oil output and exports peaked in 2004 at 3.38 million bpd and 1.87 million bpd, respectively.

However, PEMEX said oil export revenues for the first four months of the year, however, jumped 52 percent from a year ago to $15.404 billion, as Mexican oil sold at an average of $85.70 per barrel -- $36.30 more than a year earlier.

Mexico's natural gas production data was rosier in April, showing a rise to 6.714 billion cubic feet per day from 6.680 bcfd in March. Natural gas imports, used to top up a shortfall in domestic production, fell to 406.4 million cubic feet per day in April from 496.9 mcfd in March.

Source: Reuters| By Jason Lange

[NORTH AMERICA] Mexican Opposition Heightens Criticism of Oil Bill

2008-05-14T09:53:00.005+02:00

Mexico's opposition Institutional Revolutionary Party heightened its criticism of President Felipe Calderon's proposal to loosen the state monopoly on the oil industry, potentially posing more obstacles to his plan.

Beatriz Paredes, head of the party known as the PRI, took aim at two key components of the initiative: a plan to permit private businesses to own refineries and another allowing state company PEMEX, more freedom to hire private service companies for exploration and production.

``We won't support any change that means sharing the oil revenue with private companies,'' Paredes said as lawmakers began 71 days of debate on the bill in the Senate. ``The initiative's proposals regarding contracts are suspect, confusing and open to interpretation.''

The comments from the PRI, whose support Calderon needs for the measure to be approved, suggest the government will have more difficulty passing the bill, said Miriam Grunstein, a lawyer specializing in energy for Thompson & Knight Associates in Mexico City. Calderon's National Action Party may be forced to soften the initiative to the point it won't achieve its goal of reversing a decline in oil output, she said.

``When the initiative was presented there seemed to be a consensus with the PRI,'' Grunstein said. ``Today the government's proposal looks more and more diluted and questioned.''

Calderon submitted legislation on April 8 to give Pemex more leeway for hiring private and foreign companies to explore, produce, refine and transport oil. The government is looking for ways to finance oil exploration and staunch a decline in output and reserves.

Two-Month Debate
The opposition Party of the Democratic Revolution, or PRD, helped force the two months of scheduled debate on the bill when party members blockaded Congress for more than two weeks last month to protest the plan.

Cuauhtemoc Cardenas, co-founder of the PRD, said during the debate that Calderon's proposal aimed to allow Pemex to sign risk contracts with private companies. Such deals would violate the constitution and allow companies to be paid based on their output, he said.

Cardenas also urged the government to negotiate with the U.S. how each country can explore deep-water wells that straddle their maritime border.

National Action Party
German Martinez, leader of Calderon's National Action Party, denied in his speech that the plan proposed risk contracts.

``Under no circumstances does the initiative transfer the possession of resources or compromise one peso of oil revenue,'' Martinez said.

Martinez said the initiative would help Mexico lower gasoline imports, which represents about 40 percent of domestic consumption.

Paredes called on PRI lawmakers to carry out ``an exhaustive revision'' of the parts of the proposal pertaining to contracts with private companies. Grunstein said the government made a mistake by not defining more precisely the terms of such contacts.

``I think it's a strategic error of the proposal,'' she said. ``Leaving things open like that smells bad.''

Source: Bloomberg|By Jens Erik Gould and Adriana Lopez Caraveo

[NORTH AMERICA] Mexican oil production is a concern for United States of America

2008-05-04T14:49:00.003+02:00

Mexico's oil production is in a dangerously steep decline. Why should that matter to the United States? Because Mexico exports 1.2 million barrels of oil per day to the United States, which is 8 percent of the U.S. supplies. Mexico ranks third behind Canada and Saudi Arabia in exports to the United States of America. In an already tight oil market it would be difficult for the United States to find another million- plus barrels. And if we could, it would likely come from a shakier supplier.

In a recent televised address, Mexico's President Felipe Calderon warned, "We must act now, because time, and oil, is running out on us." Analysts estimate at the current rate of consumption Mexico's oil production could last 9.2 years and exporting will end in less time.

Mexico's oil revenues account for 40 percent of its federal budget. For decades Pemex has been the cash cow for each president, providing the revenues for social programs, operating expenses, and government salaries.

The majority of the Pemex revenues go first to union corruption, then to the federal budget and what is left over goes to operate Pemex. Even with revenues from almost $100 oil, Pemex went into the red in 2007, while oil companies around the world reaped record profits.

Mexico nationalized its oil industry in 1938. Taking the oil fields from foreign companies and standing up against foreign businesses was more than just nationalizing the oil industry.

Mexico's largest oil field is in an annual decline rate of 15 percent. Mexico's congress has known for several years the fate they are now facing and have done nothing to prepare for it. The continued rise of high oil prices has disguised the decline in production.

The good news is Mexico's largest potential reserves are believed to be in the deep waters of the Gulf of Mexico. The bad news is Mexico does not have the technology, money or trained personnel to explore in deep water and Mexico's constitution bars Pemex from partnering with foreign oil companies.

Mexico's President Felipe Calderon recently introduced legislation that will give Pemex the ability to contract work out to private companies, manage its own revenues and raise cash by issuing bonds that only Mexicans could buy.

Source: TheAdvertiser

WESTERN HEMISPHERE: Mexican oil output falls 7.8 pct in first quarter

2008-04-22T00:43:00.002+02:00

Mexico's state-run oil company said Monday that oil production fell 7.8 percent to 2.91 million barrels a day in the first quarter as current reserves dwindle.

Petroleos Mexicanos, has struggled with falling reserves, especially at its main Cantarell oil field, and lacks the money and expertise to launch new drilling projects. Pemex only has enough proven oil reserves to last nine years at current production rates.

President Felipe Calderon this month proposed an energy reform that would allow more private and foreign investment to jump-start new projects, but opponents argue the bill is a veiled attempt to privatize the industry, which they consider a symbol of national sovereignty.

Petroleos Mexicanos also said Monday that oil exports had dropped 12.5 percent in the first quarter, mostly due to falling production and port closures caused by bad weather in February. The company did boost natural gas production to a record 6.6 billion cubic feet of gas per day in the first quarter, up 13.2 percent over the same period last year.

Source: Associated Press

WESTERN HEMISPHERE: PEMEX. A Light Energy Reform?

2008-04-15T05:45:00.004+02:00

The speculation is over. With a thirteen minute address to the nation last Tuesday, April 8th Mexico's President Felipe Calderon announced, and in turn submitted to Congress, a detailed five point energy reform plan. It is now, to borrow from Churchill, officially the "end of the beginning." And, as to be expected, the dissection is well under way with the punditry weighing in quite vociferously from Mexico City to Houston to New York to London and many arguing that the package lacks vision and is too "light" to affect the changes that PEMEX (and Mexico) truly need. Yet, is it accurate and useful to continue using the qualifier "light" as the debate unfolds? Moreover, is the proposal really a vision-less effort that will have no impact on the current energy woes facing Mexico?

SOMETHING FOR EVERYBODY
Not surprising given the several hundred page package itself, there is no short answer to these or the myriad questions surrounding the debate. Indeed, President Calderon's proposal seems to be a classic piece of legislation in that it offers a little something to everybody. For the fervent nationalists, Calderon repeated many times PEMEX will not be privatized. For the business community and private investors he suggested the possibility of building and operating refineries on behalf of PEMEX and investing in downstream transportation infrastructure. For PEMEX management, the proposal appears to respond to the cries for an opening toward greater financial and strategic autonomy. Lastly, and perhaps most importantly from a public affairs vantage, through a creative concept called "Citizens Bonds," the proposal offers all Mexicans the ability to truly own a piece of PEMEX and gain economically from a successful PEMEX.

Mexico's oil woes are a well documented tale: production is in decline and, equally alarming, reserve replacement is well off, particularly in comparison with international oil companies. Meanwhile, these oil business issues occur against the larger backdrop of the government's reliance on PEMEX for almost 40 percent of the Federal budget. Thus the increasing emphasis at PEMEX to reverse the drastic decline of the massive Cantarell oil field is more than just a business issue, it is fiscal balance matter. And it is within these confines that President Calderon has introduced the reform proposal.

MODERNIZING PEMEX
The most pertinent portion of President Calderon's reform package focused on the need to create a more modern, agile PEMEX. The aim is enhanced and increased autonomy through a major re-write of the Organic Law governing the company, including a revamped Board of Directors that would count four highly experienced independent members. This is a particularly welcome idea as to date the PEMEX board has seemed unable to comprehend PEMEX's needs and requirements as one of the world's largest oil companies - and what it takes to maintain that status. Instead, to be blunt, their focus was to ensure PEMEX remained the golden goose: provider of cash to the government and jobs to the PEMEX union.

Meanwhile the proposed modifications and "opening" of the downstream sector seems to have important upsides, not the least of which is addressing PEMEX's - and Mexico's - fuel imbalance. Unclear, however, is how enthusiastic the private sector would be in investing in Mexican refineries.

POCKETBOOK NATIONALISM
One of the more surprising and interesting elements of the measures before Congress is the intention to create a mechanism for Mexicans to invest in PEMEX. The so-called "Citizens Bonds" is a clever form to encourage popular capitalism and allow the Mexican populace to have an increasing sense of ownership over their cherished national oil company. The cry since 1938 has been that "oil belongs to the people." It is one thing to say that as President Calderon repeatedly has, yet it is another case altogether when the people directly own a piece of the national oil company and stand to benefit financially if the company does well. Call it a new paradigm, Pocketbook Nationalism.

Perhaps the most intensely scrutinized element of the current proposal is with regards to PEMEX service contracts, with revisions to allow PEMEX to offer incentives for efficiencies (lower costs). The dissection of this part of the proposal is not without reason as the previous efforts by PEMEX at multiple service contracts for natural gas were underwhelming. Indeed, it is this part of the reform proposal that apparently comes up shortest in the eyes of the industry - see "reform light." Many industry observers were disappointed that there was not a stronger signal from Mexico to entice interest in what has been described as one of the greatest prizes in the oil industry. PEMEX chief Jesus Reyes Heroles seemed to be hedging his bet on this part of the reform package when, in response to who would be interested in these contracts he said "Maybe not Exxon Mobil, but other companies."

On the other hand, local industrial groups seem content with what has been proposed, perhaps aware of the historic role of PEMEX as a tool for domestic industrial development. Not surprisingly, the left is fervently opposed to these reforms and continue to twist this very aspect into their prior and ongoing campaign to fight any effort toward the "privatization of PEMEX."

A GOOD START
Mexico's energy reform does not have to please everyone but it also cannot ignore the risks of the status quo. By focusing first on improving PEMEX's fiscal state and operating efficiency, revitalizing the Mexican Petroleum Institute and defining a long term energy strategy, the reform could achieve more than many critics expect and move past the status quo. As PEMEX grows more confident in its own capabilities, it may also become less difficult for the Mexican population to accept their national oil company partnering with foreign companies which would be eager to share their expertise in order to access Mexican oil. There is simply no reason why PEMEX cannot be as successful as other national oil companies such as Petrobras, Statoil or Petronas. Central to this change is the need to develop a long term vision for Mexico's energy sector, one which would not emphasize the rentier nature of oil, but instead focus on Mexico's long term development goals. The modernization of PEMEX and Mexico's oil industry vis a vis Mexican development has always demanded an incremental approach.

Reaching consensus on energy reform is a Sisyphean task, but most agree that the key to any reform is to provide a more certain future for PEMEX. The disagreement has always been on the "How." This reform package will not completely settle the argument but all in all it should rate a smart effort by Calderon at this point. The old axiom is you need to crawl before you can walk and while PEMEX will not be running marathons anytime soon, they should be able to knock off a few 10K's - at a nimble pace - if the proposed changes are adopted.

Source: Latin business chronicle|by Jeremy Martin & Roger Tissot
Jeremy Martin is director of the energy program at the Institute of the America. Roger Tissot is an independent energy consultant. They wrote this column for the Latin Business Chronicle.

NORTH AMERICA: The Mexican State Oil company, PEMEX, short on revenue, reserves.

2008-04-02T07:21:00.004+02:00

These are grim days for Mexico's state-owned oil monopoly, PEMEX.

After decades of mismanagement, corruption and use as a piggybank by the federal government, PEMEX has plunged into a crisis marked by sharply declining oil reserves. Though global oil prices are at all-time highs, the state monopoly reported a $1.5 billion loss in 2007 as domestic production fell. The urgent question facing Mexican officials is how to fix the world's 10th-largest oil company. Pemex's production fell 5.4 percent last year and exports dropped 6 percent, trends that are expected to worsen over the next decade.

President Felipe Calderón has stirred the passions of many Mexicans by suggesting that the solution is to open PEMEX to foreign investment after 70 years of being a state-run enterprise.

The stakes are high not only for Mexico, but for the United States, which imports 10 percent of its oil from Mexico.

Many government and industry officials on both sides of the border are keen for a transformation of PEMEX. But most experts expect only incremental changes and not changes to Mexico's constitution that would allow foreigners a sizable stake in the enterprise.

Analysts expect that Calderón will seek to somehow give Pemex more financial independence, freeing it from some of its huge tax burden. Last year, Pemex gave 80 percent of its $100 billion in revenue to the federal government.

The aim is to allow PEMEX to spend more of its money on new technologies and exploration and operate more like a company than a government bureaucracy.

Calderón's National Action Party is expected to introduce a bill this week in the Mexican Congress, ending months of speculation about just how modest or far-reaching the proposals will be.

Private is unpopular
When it comes to Pemex, any kind of tinkering is hugely controversial.

The enterprise has been a symbol of nationalist pride since then-President Lázaro Cárdenas expropriated the Mexican oil industry from American and European companies in 1938. It was a bold move by Mexico's fledgling revolutionary state, and it is still common to hear the refrain that "the oil belongs to all of us" in Mexico.

In recent weeks, opposition politicians have held large rallies against privatizing Pemex and warned that any such attempt could lead to violent confrontations.

Lawmakers within the president's party say the proposal may call for private investment in pipelines and oil storage, as well as joint ventures to develop oil fields along the U.S.-Mexico border. But the bill, Calderón's allies say, will not allow large-scale private investment in oil production.

The Mexican public is not prepared to accept radical change, analysts say. According to recent polls, only 37 percent of Mexicans favor allowing private investment in Pemex.

"So much of this is just about changing public perception," said Duncan Wood, an international relations professor at Mexico City's Autonomous Technological Institute and a member of the Mexican Energy Network. "We've known about the problem for five years, but it's only in the last 12 months that the government has been able to get the issue into the public's mind."

For years, petroleum revenue has made up almost 40 percent of Mexico's federal budget, paying for new roads, hospitals and poverty programs.

But the government didn't leave Pemex enough money for exploration. That wasn't a problem as the company tapped massive, easy-to-exploit oil fields.

But now that those fields are drying up, Pemex faces tough prospects: It lacks the money and technology to get at deep-water oil deposits in the Gulf of Mexico, potential windfalls that the Mexican government believes could keep Pemex oil flowing as before.

One solution, favored by Calderón, would be to open Pemex up to private investment and enlist the help of foreign companies.

The Calderón administration also has raised the possibility of joint ventures between Pemex and other state-owned oil companies, like Petrobras in Brazil and Statoil in Norway. Officials hope that might be a more palatable alternative to teaming up with private companies such as ExxonMobil.

But Mexico's constitution bars direct private investment in Pemex.

"If you don't change the constitution, there's very little you can actually do," said David Shields, a Mexico City energy analyst. "You can move pieces around, but they will hardly budge."

Proven stores

According to government projections, Pemex is headed for disaster if it doesn't act.

Nearly 12 billion barrels of proven reserves, most in the Cantarell field off the coast of the Yucatán peninsula, will run out in nine years, and Mexico could become an importer of crude oil by 2011. By comparison, Saudi Arabia has 260 billion barrels and the U.S. has 21 billion barrels of proven reserves.

Because Pemex has invested little in refining, it is in the perverse position of importing nearly 40 percent of its refined gasoline from the United States, a percentage that is expected to climb sharply if Mexico doesn't build new refineries.

The U.S. also has a deep interest in Pemex's fortunes.

Should Mexico be unable to export oil, the U.S. probably would end up buying more oil from places such as the Middle East to make up the difference.

At the same time, American oil companies stand to benefit if Mexico eventually opens Pemex to private investment.

"Mexico is seen potentially as a place with lots of opportunities for U.S. companies," said George Baker, a Pemex expert at energia.com, a Houston-based online news service focusing on the oil industry. "Pemex has only explored about (25 percent) of the prospective oil fields so there is a lot out there to do."

But experts say Washington is wary of meddling in Mexican affairs.

"The U.S. is incredibly interested in this," Wood said. "But the American government isn't stupid. It is treading very lightly; it doesn't want to frighten anyone. The U.S. is always seen as the bogeyman in Mexico and never more so than on oil."

Mexico's leftist leaders charge that privatization has long been the goal of Mexican elites.

Opposition leader Andrés Manuel López Obrador, who nearly won the presidency two years ago, has led several large protests against energy reform and said privatization would bring social upheaval and possibly violence. Andrés Manuel López Obrador, argues that Pemex has the money and the technical know-how to do its own exploration without looking to outside help.

"Only technocrats and traitors can argue that Pemex can't make it on its own and that the only salvation is handing it over to the private sector," he told a crowd of protesters recently.

Many observers have criticized Calderón's handling of the Pemex overhaul. His government offended many by preceding the reform with a media blitz extolling the virtues of deep-water exploration.

"I don't think they ever did a serious analysis" of how to pass energy reform, Shields said. "They already have protests, and the proposal isn't even on the table yet."

Source: statesman| By Jeremy Schwartz

NORTH AMERICA: Mexico energy bill close, but no risk contracts

2008-03-28T19:58:00.002+01:00

Mexico's ruling conservatives are fine-tuning an energy bill with opposition parties but the reform could disappoint investors by keeping profit-sharing contracts illegal, lawmakers said on Wednesday.

President Felipe Calderon's National Action Party, or PAN, which lacks a majority in Congress, has been trying to convince the opposition in recent weeks to revamp energy laws to boost the sagging state-controlled oil industry.

But the PAN is giving up on a core part of its vision for turning around the sector: attracting foreign partners to technologically challenging but potentially huge deepwater oil fields by offering them a share in profits.

"Risk contracts are not in the equation," said PAN lawmaker Juan Bueno, who sits on the Senate energy committee.

Under Mexico's constitution, state monopoly Pemex has sole rights to explore for and produce Mexican oil, and left-wingers bitterly oppose allowing contracts that would have Pemex share risks and profits with outside companies.

Bueno said the PAN was considering a less-extreme proposal that would let Pemex form partnerships with other state-owned energy firms. "That is something we are studying," he said.

He did not say what form such partnerships could take.

Pemex announced another fall in total oil reserves on Wednesday, showing that its fledgling deepwater drilling projects have so far not been able to confirm what seismic tests suggest could be some 30 billion barrels of oil under the Gulf of Mexico seabed in water several kilometers deep. Neither private nor state-run oil companies are expected to sign up for risky deepwater oil projects without contracts that would give them a share in profits.

Cabinet members and PAN lawmakers are meeting opposition legislators all this week to try and reach a consensus on a proposal that could be unveiled within two weeks.

PAN lawmakers said the proposal could also call for reducing state oil company Pemex's heavy tax load and giving the company more freedom to make business decisions.

Mexico is a top supplier of crude to the United States, but decades of underinvestment have left oil reserves and output waning and left Mexico importing 40 percent of its gasoline.

Bueno said the PAN proposal might also include opening up fuel storage and transport to more private investment.

Lawmakers for the centrist Institutional Revolutionary Party, or PRI, another key opposition bloc, plan to meet Calderon's energy minister next week to discuss the proposal, the party's leader in the lower house told reporters.

PAN lawmakers said the government wanted to seal a deal with the opposition before presenting its bill.

"That's where we're at. It wouldn't make sense to present a bill that was destined for failure," said Alonso Lizaola, a PAN lawmaker and secretary on the lower house energy committee.

Source: Reuters| By Jason Lange

NORTH AMERICA: Mexican Party Says Time Running Out for Energy Bill

2008-03-28T19:54:00.001+01:00

Mexican lawmakers from the opposition Institutional Revolutionary Party said time is running out to debate and approve an energy bill before Congress recesses April 30.

Senator Manlio Fabio Beltrones, the party leader in the Senate, urged President Felipe Calderon to present as quickly as possible his plan to loosen the state's monopoly on oil, which the government says is the only way Mexico can halt declines in output and reserves.

Calderon's inability to get a bill through Congress would be a failure for his administration, which has made energy reform a top political priority. Calderon needs the support of the opposition party, known as the PRI, to get the bill passed.

``It's not over until the fat lady sings,'' said Armand Peschard-Sverdrup, senior associate at the Center for Strategic and International Studies in Washington. ``But clearly the clock is ticking.''

Beltrones, speaking today in an interview on Radio Formula, said Congress may open an extraordinary session between May and August to debate an energy bill.

Calderon's National Action Party, known as the PAN, has drafted part of the energy reform package. The plan would allow state oil company Petroleos Mexicanos, known as Pemex, to join with private or foreign companies to develop wells that straddle the U.S. border.

Alonso Manuel Lizaola de la Torre, a PAN member in the lower house of Congress, said he had planned to present the initiative yesterday. Hector Larios, his party leader in the lower house, asked him to postpone it.

Border Fields

``To be able to realize contracts and agreements for the joint development of border fields is extremely important for Mexico,'' the proposal says, according to a copy provided to Bloomberg News by Lizaola de la Torre.

Calderon's party postponed presenting the initiative because of recent protests by opponents of the reform, including a rally in Mexico City's main square yesterday led by former presidential candidate Andres Manuel Lopez Obrador, Lizaola de la Torre said.

Lopez Obrador and members of his Party of the Democratic Revolution have promised to hold rallies at congressional buildings, airports and financial institutions to protest reformation of the energy industry.

Mexico's constitution reserves oil to the government, banning any outside investment in exploration or production. The country nationalized most aspects of the oil industry in 1938. Calderon is hoping to change secondary laws to allow private and foreign companies to team up with Pemex, which would retain ownership of the drilling projects.

Broader Initiative

Lawmakers from Calderon's party intend to present the border-well bill along with a larger energy initiative, Lizaola de la Torre said.

Emilio Gamboa Patron, PRI leader in the lower house of Congress, also said today that his party can't be rushed to pass an energy bill and time is running out.

Pemex generates about 40 percent of federal revenue. Crude output may drop by a third by 2016 unless partnerships with other companies gives it access to technology that would allow it to drill deepwater wells, the government has said.

Investment in the industry may help Mexico's economy as exports to the U.S., which buys over 80 percent of Mexican goods sent abroad, are falling. Mexico's central bank in January cut its economic growth forecast for 2008 by half a percentage point, to a range of 2.75 percent to 3.25 percent.

``Mexico is going to have to brace itself for what could be a severe and lengthy recession in the U.S. and the ripple effect on the Mexican economy,'' Peschard-Sverdrup said. ``Energy reform could help to neutralize that.''

Source: Bloomberg| by Adriana Lopez Caraveo & Jens Erik Gould

NORTH AMERICA: Mexico´s oil. An anniversary highlights divisive issue of private investment

2008-03-22T15:35:00.007+01:00

The battle lines over the future of Mexico's oil industry hardened Tuesday — the 70th anniversary of its nationalization.

At a ceremony in the oil state of Tabasco celebrating the takeover, President Felipe Calderon issued a call for more private investment in the national oil company, Pemex. He proclaimed the fate of the company the defining issue of his generation.

Several hours later his leftist rival, Andres Manuel Lopez Obrador, led a huge protest march in the capital against any form of privatization. At stake is the viability of Mexico's oil company, which provides nearly 40 percent of the government's budget and sends 1.4 million barrels a day to the United States through the Houston area.

After nearly two decades of free-market policies that have seen most government-owned industries privatized, communal farms dismantled and labor unions weakened, nationalized oil remains as one of the few economic touchstones of the Mexican Revolution.

In 1938, President Lazaro Cardenas expropriated the oil fields, following months of turmoil involving strikes by Mexican workers.

"The oil is ours!" became a rallying cry for generations of Mexicans. Oil revenue fueled decades of development and other sources of revenue were left untapped.

High world oil prices have assured huge profits for Pemex. But the country's proven reserves and production have declined as the offshore Cantarell field plays out. The field has accounted for two-thirds of Pemex's production over the past three decades.

"To transform Pemex is to strengthen Mexico," Calderon said Tuesday.

Without new proven reserves and increased production, he said, Mexico would cease being an oil exporter in nine years, and cash-strapped Pemex would not rebound without foreign investment and technology.

Calderon and others argue that private participation is necessary to develop the ultradeep-water fields in the northern Gulf of Mexico that will anchor Pemex's future.

But those opposed to private investment insist that Pemex can develop the new fields on its own. They shrug off predictions of Pemex's impending collapse as scare tactics meant to pressure a sale to the Americans and other foreigners.

"This is very sensitive for the Mexicans," said political analyst Alfonso Zarate.

"People in general have a lot of fear about private participation in the oil industry."

Though public unease about Pemex's future has been widespread, opposition to private involvement is spearheaded by Lopez Obrador, the politician who narrowly lost to Calderon in 2006.

Lopez Obrador's campaign against the "privatization" of Pemex — which Calderon and other government officials insist is not on the table — has bolstered the former Mexico City mayor's political fortunes. His prospects were strengthened by last Sunday's internal elections in the Democratic Revolution Party, in which his allies won most leadership posts.

At the same time, Calderon's ability to push his agenda for Pemex in Congress has been weakened by a scandal surrounding Interior Minister Juan Camilo Mouriño, who is accused of influence peddling.

Mouriño has been seen as Calderon's chief negotiator in the ongoing Pemex debate.

"Lopez Obrador demonstrated his astuteness and his capacity to hit hard at the right moment," Zarate said.

"There is a very important political base that supports his arguments."

The most promising replacements for Cantarell lie in the ultradeep seas of the northern Gulf, close to U.S. and Cuban territorial waters. Pemex doesn't have the technological capacity to drill the deepwater wells. Foreign companies are developing deep-water wells in Cuban and U.S. fields.

Mexican proponents of partnering with private companies argue that if Pemex doesn't begin drilling soon, it will lose control of the internationally shared deep-water fields.

Source: Houston Chronicle| By DUDLEY ALTHAUS

NORTH AMERICA: oil sector reform in Mexico?

2008-03-22T01:56:00.003+01:00

The Mexican government has said that it will put forward legislation to reform the oil sector by the end of March.

A number of recent signals suggest that a bill is imminent, most notably an Energy Ministry report, which showed dramatic increases in output, exports and tax revenues if private – multinational – investment is permitted in exploration for deep water oil reserves in the Gulf of Mexico.

The fact that the government sent out these signals suggest that it is confident Congress would pass reforms. This comes in the wake of two potential setbacks: the election of Alejandro Encinas, who is close to defeated 2006 presidential candidate Andres Manuel Lopez Obrador, as leader of the opposition Party of the Democratic Revolution (PRD); and a recent scandal involving Interior Minster Juan Camilo Mourino, who is President Felipe Calderon’s chief negotiator and closest political ally.

The oil sector is a nationalist sacred cow in Mexico, and any Calderon initiative would stop well short of privatising state oil monopoly, Petroleos Mexicanos. Apparent government confidence suggests that Calderon is close to reaching agreement with Mexico's other main opposition party, the Institutional Revolutionary Party (PRI). This implies that the PRI will not seek to claim Mourino's head over contracts with Pemex, which he signed on behalf of his family's business when he held government posts earlier this decade – which will save Calderon from potential embarrassment and deadlock.

Source: Oxan

MEXICO: Una transformación inteligente de PEMEX

2008-02-25T18:22:00.002+01:00

Fortalecer a PEMEX dándole autonomía financiera y haciéndolo más competitiva, son los ejes de la propuesta que el Ing. Cuauhtémoc Cárdenas Solórzano presentó en la Cámara de Diputados el jueves 21 de febrero, ante un auditorio repleto, con la presencia de los coordinadores de todos los grupos parlamentarios allí representados. El corazón de su propuesta radica en:

1. No estamos ante un problema de falta de dinero para hacer las cosas, sino de ausencia de una estrategia inteligente que apunte al desarrollo nacional. Hoy PEMEX está estrangulada entre la confiscación de sus ingresos por Hacienda, el chantaje de su sindicato y la expoliación de los contratistas. Urge cambiar el tratamiento fiscal que se le da, sacarla del presupuesto de egresos de la federación, dotarla de autonomía de gestión y permitirle operar como una empresa pública que rinda cuentas a sus accionistas.

2. PEMEX debe convertirse en una empresa de calidad mundial. Hace 30 años Petrobras de Brasil era mucho menor que PEMEX y hoy la ha rebasado en muchos ámbitos, permaneciendo como una empresa pública, bajo el control del Estado brasileño, pero con formas de gestión ágiles, un órgano de dirección abierto a consejeros de afuera del gobierno y con el desarrollo de tecnología propia.

3. PEMEX puede concurrir a los mercados internacionales y adquirir la tecnología necesaria para la exploración y explotación de petróleo en aguas profundas, es decir, para localizar y desarrollar nuevas reservas de energéticos como las que presumiblemente se hallan en el seno marino del Golfo de México. No necesita contratos de riesgo ni asociarse con empresas extanjeras para compartir utilidades; paga el costo de los servicios a valor de mercado y ya.

Yo añadiría una más:

4. Hacer valer una política de competencia económica que evite prácticas monopólicas en las operaciones de PEMEX y en su sindicato y estimule prácticas competitivas.

Todos estos cambios son impostergables, a riesgo, entonces sí, de quedarnos sin petróleo y sin ingresos. Pueden instrumentarse sin privatizar a PEMEX y sin cambiarle una coma a la Constitución Política de los Estados Unidos Mexicanos. La propiedad de PEMEX no está a discusión, y las decisiones fundamentales de la política petrolera del país deben tomarse en función del interés público, no de intereses privados o del extranjero.

Cuauhtémoc Cárdenas no ensalza o condena de antemano a nadie, sino pone sobre la mesa una propuesta que invita al estudio, al diagnóstico y al debate inteligente.

Source: Milenio|by carlosherediaz@yahoo.com

MEXICO: The President Calderon Hinojosa, to revive petrochemical industry

2008-02-19T21:37:00.003+01:00

The President Felipe Calderon intends to revise the way state oil company Petroleos Mexicanos (Pemex) sells petrochemical feedstock, potentially opening the door to a $1bn (€680m) ethylene plant, he announced on Tuesday.

“We are talking about the relaunch of the nation’s petrochemical industry," Calderon said in Spanish in a nationwide broadcast statement. “This will allow the development of a plant that will produce 1m tonnes/year of ethylene.”

In a second phase, some $700m would be invested downstream, he said.

Calderon said the plan is to “create a mechanism which, via a licensing process, will bring closer a market price or one that is really determines long term supply prices.”

State-run Pemex is the country's largest tax contributor, and its profits are tightly controlled for federal budgetary reasons. The policy has been a long-standing complaint of petrochemical producers.

From 2000-2006 the Vicente Fox administration also tried to encourage a massive expansion the nation’s ethylene production capacity. That scheme, dubbed Project Phoenix, ran aground on refusal by the Finance Ministry to allow Petroleos Mexicanos to charge differentiated rates for feedstock.

However, in 2007 the legislature overhauled Mexico's tax structure with an eye toward lowering energy costs for industrial consumers, including the petrochemical industry. The Mexican Senate followed this move by drawing plans to revive Mexico's petrochemical sector.

“The investment in this ethylene plant, which will be undertaken by the private sector, is $1bn for the plant and another $700m more in derivatives,” said Calderon.

The structure announced by Calderon bears some similarity to a plan described as under discussion by Jose Luis Zepada Pena, president of Mexican chemical industry body ANIQ in October. ANIQ proposed linking natural gas prices to the petrochemical market cycle.

“When margins are good the government could charge a premium, when the market is bad the government would charge less. Sharing the wealth when times are good and the risk when times are bad," he said.

Source: ICI News| By Alex Manda

WESTERN HEMISPHERE: Petroleos Mexicanos renews ExxonMobil deal

2008-02-07T18:14:00.000+01:00

Mexico's state-run oil company PEMEX has decided to renew its non-commercial agreement with ExxonMobil for research and development projects.

The deal permits PEMEX and ExxonMobil to exchange ideas regarding oil and gas extraction, while maintaining strict guidelines against profitable ventures with private, foreign firms.

Mexican law prohibits PEMEX from entering into profit-sharing ventures with other companies, a law that is expected to come under review in the coming months and could be subjected to a congressional vote come April.

President Felipe Calderon is reportedly interested in opening up the Mexican energy sector to outside investment but faces stiff opposition from some Mexican lawmakers who are wary of diluting profits despite assertions from experts that output would most certainly increase with the help of foreign energy giants.

"The government wants to propose an ambitious energy reform that would include opening downstream oil -- and possibly deep sea drilling -- to private investment, but a number of factors are pushing it to wait for a more appropriate time to publicly announce a proposal," said Enrique Bravo, an analyst with the New York-based Eurasia Group.

PEMEX profits account for a large portion of the Mexican budget and fund most of the country's social projects, a condition that makes it untouchable to many federal officials.

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Recent reports show that PEMEX output has peaked in recent years, with 2004 representing the height of production.

PEMEX operational output fell 5.3 percent in 2007, according to officials, with daily production down to 3.08 million barrels per day. For three months last year, production actually fell below the 3 million bpd mark.

Last year's production report for the country's largest oil field, Cantarell, was even worse than the national average.

Cantarell's production fell to 1.2 million barrel per day during the last month in 2007, a 16 percent drop from the previous year.

Jaime Brito, an analyst with the U.S.-based energy consulting firm PFC Energy, told United Press International that PEMEX "is up to its neck in debt."

Mexico is still holding out hope that a new oil field discovered in 2006 will help PEMEX bolster its production levels in the coming years.

Extraction from the new field is unlikely for another decade, Luis Ramirez, PEMEX chief executive, said at the time. That would give officials plenty of time to ascertain the viability of the new field and determine whether its production levels could live up to expectations.

That would certainly be news well received in Washington, where the Bush administration has stressed the need to reduce U.S. dependence on the Middle East for its energy needs and is looking to Mexico to increase its production. America's southern neighbor already sends on average 1.8 million bpd across the border.

That increase likely won't happen, even in the long term, without the help of oil giants like ExxonMobil and others. Whether Mexican lawmakers allow that to happen remains to be seen.

Source: United Press International |by Carmen Gentile
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NORTH AMERICA: Mexicans against Oil Privatization

2008-01-22T06:51:00.001+01:00

Mexico's opposition leader Andres Manuel Lopez Obrador denounced on Friday that the administration could speed up handing in PEMEX to foreign interests with Juan Camilo Mouriño appointment as government secretary.

The ex presidential candidate told press that to avoid that situation, civil resistance measures are being elaborated and a national protest in March is currently planned.

Andres Manuel Lopez Obrador called for people to defend the national energy resources, becauseJuan Camilo Mouriño , who assumed the post on Thursday, represents the interests of foreign transnationals, to which Mexican President Felipe Calderon promised to give oil and gas.

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He insisted on the importance of the social movement, because bringing the country out of poverty and marginalization depends on that struggle.

"I have information that Felipe Calderon is trying to privatize PEMEX without the need to change the Constitution, just changing secondary laws, especially the Regulation of the article 27, regarding oil," Andres Manuel Lopez Obrador asserted.