By OGJ editors
HOUSTON, Apr. 23 -- Members of President Vicente Fox's National Action Party (PAN) this week met the first, fully armed challenge to the multiple service contracts (MSCs) being implemented by the country's state oil company Petroleos Mexicanos (OGJ Online, Oct. 16, 2003).
According to Pemex, the MSCs are structured as long-term, (field life) contractor agreements in which the MSC contractor will be paid a "unitized price for services and work performed," (OGJ Online, Nov. 6, 2002). Opponents claim, however, that the MSCs are but a thinly disguised form of privatization (OGJ Online, Oct. 16, 2003).
The first major test for the MSCs came Tuesday when the plenary session of the Lower House of Congress sustained a committee vote not to present the leftist Democratic Revolution Party (PRD)'s three-pronged MSC challenge to the Supreme Court for review, said Houston-based energy consultant George Baker, editor of Mexico Energy Intelligence.
In committee, where the proposal was voted down 2 to 1 by members of PAN and the liberal Institutional Revolutionary Party (PRI), PRD members had argued that the activities of such a contract amount to exploration and production, activities reserved to the State by Article 27 of Mexico's Constitution. Under terms of the MSDs, they argued, there also is a functional relationship between payment and the volume and price of gas, which is prohibited by Article 6 of the Petroleum Act of 1958. Furthermore, they contended, an MSD contact amounts to a concession, something also not permitted by that law.
The unexpected, but winning argument by the committee, Baker said, was that a petition by the Lower House for a review by the Supreme Court could only be exercised when the matter concerned the actions of the Executive, namely, the President. Because the MSCs concerned actions by Pemex, there was no basis for Congress to act.
While Pemex's E&P unit and the companies who won MSC tenders may be relieved at this outcome, there may be some reason for discomfiture as well, Baker said.
"It is little comfort to know that the MSCs passed an important policy and legal test on the grounds of a technicality that has nothing to do with energy policy in Mexico.
"The question that is still open—unanswered by the vote in the Congress—is, 'Does Mexico want the expertise, capital, and technology of international oil companies or not?' While not a direct answer, a finding by the Supreme Court that the contracts were both legal and constitutional would be a much bigger step than the one taken on April 20 in San Lázaro."