Mexico's energy capital spending to surge

Mexico's Petroleos Mexicanos will receive a multibillion dollar injection of capital as the state oil company seeks to become more competitive, according to a new presidential energy plan.

In a break with tradition, more than 20% of total planned capital investment in Mexico's energy sector is expected to come from the private sector (OGJ, Feb. 19, p. 29). Until legislation opening the energy sector to private investment was passed in recent years, Mexico's energy industries remained firmly under state control for more than 50 years.

Competitiveness focus

The energy plan seeks to invest as much as $33 billion in the energy sector-with most of that going to Pemex and the Federal Electricity Commission-during 1996-2000.

"The Mexican oil industry will have to modernize to become more efficient and become competitive again," said Pemex General Director Adrian Lajous Vargas.

"The public investment will be a decisive factor in elevating the coverage and the quality of the energy services," Mexican President Ernesto Zedillo said.

In disclosing the energy sector development and restructuring plan, the government estimates that about $6 billion dollars will be obtained through private investment-excluding money generated from the sale of secondary petrochemicals. Officials did not indicate the areas of private investment, however.

Energy goals

Zedillo's administration, which will end in 2000, has eight general energy goals, including rapidly expanding production, increasing competitiveness, and promoting energy efficiency.

Zedillo said at the Pemex refinery at Tula de Allende, Hidalgo, "We are proposing to fortify the strategic capacity and operating efficiency of Petroleos Mexicanos, at the same time vigorously supporting its efforts in exploration and production of primary hydrocarbons."

The president's plan also calls for Pemex's further restructuring, which has been under way for several months. Officials did not elaborate on Pemex's restructuring other than to say it is being done to make the company more efficient.

A Pemex contractor said the oil company has been replacing bureaucrats with professionals. While the administrative changes are good, he said, there are still many vacant posts. That is causing a slowdown in obtaining contracts.

Most of the private capital expected to be invested in Mexico's energy sector will be directed to new power plants and gas distribution systems.

The 5 year plan calls for tendering for bid 20 power generation plants during 1995-2000 that would add capacity of 9.031 million kw.

Meanwhile, the energy secretary declared that Pemex will not be privatized or become captive to private risk contracts.

The energy sector "must evolve rapidly in response to what is happening in the world and to the demands that Mexico has put forth," said Energy Sec. Jesus Reyes Heroles.

Among the reforms expected in the midterm are liberalization of the liquefied petroleum gas sector, Reyes said, although he didn't disclose details.

Productive capacity

Pemex will spend at least $20.7 billion to increase its productive capacity under the 5 year energy plan.

It calls for boosting Mexico's oil productive capacity 13% to 3.09 million b/d and gas productive capacity 30.5% to 5.072 bcfd by 2000.

The plan also envisions a rise of 30.7% in crude oil export capacity to 1.7 million b/d the next 5 years.

New oil production will come from existing offshore and onshore fields in Tabasco and Campeche states: Cantarel, Abkatun-Pol-Chuc, Ku, Caan, Ek-Balam, Bacab, Jujo-Tecominocan, Giraldas, Agave, Cunduacan-Oxiacaque, and Cactus-Nispero.

Also expected to contribute to the increased productive capacity of oil and gas are Poza Rica and Chicontepec, both in northern Mexico.

Environmental concerns

Among the priorities called for under the country's energy plan is a major reduction in air pollution, which has become more acute in Mexico City in recent months. Motorists, who previously were forbidden to drive their vehicles 1 day a week, were recently forced to leave their vehicles at home 2 days a week as pollution levels soared.

At the same ceremony in which the energy plan was unveiled, Zedillo dedicated 11 refinery projects that will help Pemex produce cleaner burning gasoline.

Thirteen more refinery projects are to go on stream this year to help Pemex bolster its production of clean fuels, the government disclosed, although it did not provide details. In 5 years Pemex expects to bring on line another 35 refinery projects at a total cost of $747 million to help produce cleaner fuels.

Pemex also plans to build a grassroots refinery either at Tula, Hidalgo, or Salina Cruz, Oaxaca.

Plans call for increasing export of butane, pentane, and sulfur.

Blockade update

The 1996-2000 energy strategy was overshadowed by a protest in the oil rich southern state of Tabasco, where residents and political activists blocked entry to 64 oil wells (OGJ, Feb. 19, p. 29). At last count, Pemex had lost more than $10 million because of the blockade.

Protesters last month halted the blockade after the government reluctantly agreed to consider their demands for compensation for alleged environmental damage by Pemex in the area.

"Nobody has the right to use energy resources for personal goals or as instruments of pressure in political battles," Zedillo said.

Oil is Mexico's largest source of revenue, and Pemex reportedly pays about 75% of its income to the treasury.

In 1995, Mexico produced 2.616 million b/d, down from 2.685 million b/d in 1994, Pemex reported. It exported 1.295 million b/d in 1995, down from 1.307 million b/d in 1994.

Natural gas production increased to 3.759 bcfd in 1995 from 3.62 bcfd in 1994.

Copyright 1996 Oil & Gas Journal. All Rights Reserved.