The Canadian Press - ONLINE EDITION

Mexico lays out energy reform rules for private companies

  • Print

MEXICO CITY - The Mexican government on Wednesday unveiled its proposed rules for a historic opening of the state-owned oil and energy industry, saying contracts and production licenses should be put out for public bid and go to the company that offers the best return.

Energy Secretary Pedro Joaquin Coldwell said the service station monopoly of state-owned Petroleos Mexicanos would fade only gradually as the necessary distribution and other infrastructure is made ready. Private companies will not be allowed to immediately open gas stations to compete with it.

Joaquin Coldwell said that Mexican suppliers would be given preference in contracts over foreign firms in cases where both offer the same terms. And he said that Mexico would seek a goal of ensuring 25 per cent "national content" goal in energy projects.

The rules must still be approved by Congress.

Mexico nationalized the oil industry in 1938, but in recent years Petroleos Mexicanos has struggled with falling oil production and an inability to harness new gas and oil deposits in deep ocean water or in shale deposits. And more than seven decades of state ownership have neither ensured prosperity for Mexico nor provided low gas and oil prices. A bloated union, corruption within the state-owned oil company and the government's dependence on oil revenues to fund public spending have reduced any benefits that might have trickled down to the average citizen.

The proposed regulations aim to make the oil industry more transparent by make information on projects and bidding available to the public on the internet.

"I think it is viable to have everything on the internet. That's good. That's very important," said Mexico City oil analyst David Shields. "This has worked better than most people think."

Still, it remains to be seen whether foreign and private firms will rush to develop Mexico's underdeveloped fields.

"Once you see what's put up for bid, that's when you'll see how attractive it is," said Shields, who expects the Mexican government to offer a mix of deep-water exploration blocks, shale gas deposits and other types of fields in the opening rounds.

Shields said the automatic preference for Mexican contractors, suppliers and bidders didn't make much sense, since it is based on the concept of 'all other things being equal.'

"All other things are never equal," said Shields. "In a competitive bidding process it's almost unheard of for two companies to offer exactly the same thing."

A constitutional reform passed last year allows contracts for profit- and production-sharing, as well as licenses, in which companies pay royalties and taxes to the Mexican government for the right to explore and drill. Pemex would get first consideration for licenses.

Many Mexicans remain suspicious of the reforms. On Monday, Oscar-winning Mexican movie director Alfonso Cuaron published a full-page advertisement in Mexican newspapers questioning the energy reform, asking "when will prices for gas, gasoline, fuel oil and electricity come down?"

Coldwell said in answer to the questions from the "Gravity" director that energy prices in general would come down in "the middle term," but that Mexicans would see a decline in the country's relatively high gas and electricity rates within two years after the enabling legislation is passed. He noted that Mexico currently imports gas needed to run power plants at higher prices from abroad, because the state-owned company can't produce enough at home.

Caldwell said that, in cases where oil and gas deposits cross international boundaries, Petroleos Mexicanos would have to have a 20-per cent stake in any exploration or production deal.

Mexico's oil production peaked at 3.4 million barrels per day in 2004, and has since declined to about 2.5 million barrels of crude equivalent. The government hopes the reforms will boost production back to three million barrels by 2018 and 3.5 million by 2025.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Weather for final Fringing weekend

View more like this

Photo Store Gallery

  • KEN GIGLIOTTI  WINNIPEG FREE PRESS / July 23 2009 - 090723 - Bart Kives story - Harry Lazarenko Annual River Bank Tour - receding water from summer rains and erosion  damage by flood  and ice  during spring flooding -  Red River , Lyndale Dr. damage to tree roots , river bank damage  , high water marks after 2009 Flood - POY
  • JOE.BRYKSA@FREEPRESS.MB.CA Local-(  Standup photo)-    A butterfly looks for nector on a lily Tuesday afternoon in Wolseley-JOE BRYKSA/WINNIPEG FREE PRESS- June 22, 2010

View More Gallery Photos

Poll

Should Manitoba support the transport of nuclear waste through the province?

View Results

Ads by Google