Mexico must change its judicial and perhaps its constitutional framework "to separate what can be done by government and what can be done by the private sector" in developing and expanding its energy industry to meet future needs, a Mexican legislator told an energy conference in Houston early this month.
Meanwhile, officials at Petroleos Mexicanos SA are "working around the clock" to develop a model multiple-service contract they can introduce this year to get foreign companies to help explore and develop Mexican natural gas resources early next year, an executive of the national oil company said at that same conference (see related article on p. 48).
Reform needed
Speaking through an interpreter in a keynote speech, Sen. Juan José Rodríguez Prats, a member of Mexico's National Action Party (PAN), said he feels "more and more each day" that reform of Mexico's judicial system is necessary to help promote foreign investment in that country's energy sector.
Mexico's federal government hasn't the necessary funds to develop fully all aspects of the country's energy resources, he said. "It's not necessary or desirable to fund every energy program from the national purse," said Rodríguez Prats. The meeting of industry representatives from both sides of the border was organized by the Center for Business Intelligence.
While the US throughout its history has embraced and promoted the concept of individual ability, said Rodríguez Prats, "Mexico has a deep tradition of stateism," going back to the early conquistadors who came as representatives of the Spanish crown.
That country's energy sector is considered "a national security issue" in some areas and has long been characterized by nationalism and government control, he said.
The US and Canada will resolve their energy problems "with the help of others or by themselves," said Rodríguez Prats.
"It's up to Mexico to take part" in the full development of North American energy resources and markets, he said.
Service contracts
William S. Garner Jr. of Petrie Parkman & Co. told conference participants that Mexico might follow Saudi Arabia's example in getting major international oil companies to help fund and develop its natural gas resources and markets.
If not, he said, proposals to build a pipeline that will carry natural gas from Alaska's North Slope to the Lower 48 states should stabilize the US gas market in 2010-20 and free up gas that could then be sold into the Mexican market.
The initial effort focusing on foreign service contracts for Mexican gas E&D would focus on the Burgos basin in northeastern Mexico, where a production increase of 1-2 bcfd is "achievable," said Dominguez Vargas, first vice-president of technology and professional development for Pemex.
In forging that contract model, Pemex officials are being careful "not to change any Mexican laws. That could take a lot of time," said Vargas.
Dating back to when Mexico nationalized its oil industry early in the 20th Century, the Mexican constitution strictly limits foreign investments in its energy sector, with ownership of oil and gas reserves restricted to the state-owned oil company.
However, Pemex gas production is projected to be 2 bcfd short of Mexican market demand by 2008. The company therefore is anxious to find and develop new natural gas reserves as quickly as possible.
"Mexico's gas problem rests in the years of lag and low levels of investment in exploration that have neglected the Tamaulipas and Veracruz central [areas]," Vargas said.
Although Pemex aspires to become one of the top five oil and gas companies in the world during the next 25 years, he said, it now lacks the capital and technology that it needs to find and develop supplies of nonassociated gas.
Vargas provided no hints as to the details of the model multiple-service contract that Pemex is now forging.
However, Raul Muñoz Leos, the new director general of Pemex, recently indicated to Wall Street analysts and investors that the contracts could be structured for either service companies or major integrated oil companies (OGJ, Sept. 17, 2001, Newsletter, p. 7).
