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Analysts unhappy with Mexico's energy bill



By Upstream staff 

Analysts suggest that Mexico’s energy reform bill is a good a start, but falls short of making necessary changes to get Pemex back on track.

Mexican President Felipe Calderon sent the proposal, which would allow private contractors a greater role in boosting declining oil production and building new refineries, to the Senate late Tuesday.

Independent oil expert David Shields told the Associated Press, "there's no real vision behind it. It's a proposal that tries to give something to everybody, and it doesn't seem to get very far in anything," Shields said.

Calderon stressed that the bill will not privatise Pemex.

Mexico's leftist opposition has threatened massive protests if the conservative government tries to sell off the company.

Calderon said the bill will give Pemex greater freedom to contract work out to private companies, manage its own revenues and raise cash by issuing bonds that only Mexicans could buy.

"We must act now, because time, and oil, is running out on us," Calderon said in a nationally televised address.

Oil revenues account for about 40% of Mexico's federal budget, but Pemex production is declining.

The bill would give Pemex more freedom to manage and reinvest its revenues in production and exploration.

Shields said the bill would reduce bureaucratic barriers to contracts with private companies, and would let them be paid a bonus but not a percentage cut for any oil they find.

Sharing oil or direct income from oil with outside companies remains barred under Mexico's constitution, but as oil analyst George Baker said, "you've got to start somewhere."

Mexico's oil industry was nationalised in 1938 and is seen as a symbol of national pride and sovereignty.

"I want to make clear that oil is and will continue to be exclusively Mexican property," Calderon said. "Pemex is not being privatised. Oil is a symbol of the nation's sovereignty."

The leftist Democratic Revolution Party has attacked any hint of privatisation as a potential handover of national patrimony.

Calderon said the bill would also let Pemex, which now depends on US refineries to convert much of its crude into gasoline, to hire specialised firms to build and operate new refineries for Mexico.

The bill would also enable Pemex to issue "Citizen Bonds" that Mexicans could buy and get a chance to share in Pemex's income.

Production is plunging at Mexico's biggest-yielding oil field, the Cantarell deposits in the Gulf of Mexico. But Pemex lacks the expertise and equipment needed to explore and drill in these deep-water reserves, particularly in the Gulf, where 50% of its potential reserves lie.


Wednesday, 09 April, 2008, 17:44 GMT  | last updated: Wednesday, 09 April, 2008, 17:47 GMT

Too little: Mexico's energy reform bill falls short of expectations
 

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