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

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

No comments: