[NORTH AMERICA] Mexican Opposition Heightens Criticism of Oil Bill

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

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