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PEMEX plan to Senate: ready to rumble

21 October 2008

The seven-point PEMEX and energy reform bill will be presented to the Senate today.  The energy committee failed to reach an agreement on three of the seven points, which relate to revisions to Constitutional Article 27, the PEMEX Organic Act (the company charter) and a new law on renewable energy… nothing major, right?

What will be debated in the full Senate today are agreements that will allow PEMEX to contract services with foreign companies, with the provision that these are cash for services agreements for processing or transporting petrochemicals.  However, at the insistence of the Progressive Front, PEMEX will be forbidden to write exclusive contracts for services.  Foreign entities will not under any circumstances have ownership of the petroleum, and the contracts will be subject to Mexican law except those covered by international arbitration agreements.

Foreign capital will not be permitted in certain strategic operations — specifically in operating refineries and storage facilities.

The Comisión Nacional de Hidrocarburos will have oversite and control of pipelines and wells, in addition to natural gas distribution.  The commission can, like PEMEX, contract distribution and transportation services, again for cash and under Mexican legal authority.

Probably the most controversial point is that allowing PEMEX to issue “citizen bonds” which can, apparently, be sold to individuals, but not to investment houses.  This only has PRI and PAN approval, and may be up for further revisions… or may be scrapped.  Honestly, I don’t really understand it.  I can’t figure out whether these “citizen bonds” will be like Savings Bonds you used to get from distant relatives when you were four years old and payed for some beer money r textbooks when you went to college, or whether this means Carlos Slim is going to kick in a few billion pesos.

Finally, there is a restructuring of the paraestatal’s management.  An 15 member Executive Board will oversee the new Administrative Council.  Six members of the board will be Presidential appointees, five appointed by the union and the rest representing technical and petroleum professionals nominated by the President and subject to Congressional approval.  Finally, 20 percent of PEMEX profits will be set aside for investment and development.

(My sources: Jornada, The News, El Financiero)

It’s the unresolved constitutional rewording that may lead to demonstrations and passive resistance movements later this week, and — surprisingly — it is the Progressive Front (PRD and allies) that object to the union’s involvement in management.  The other unresolved issues — relating to electrical generation and alternative energy resources — could also lead to massive protests.  If you remember, it was revelations that Juan Camilo Mouriño had family ties to Spanish investments in these areas that led the Progressive Front to oppose his appointment as Secretaria de Gobernacion, and Spanish investments in wind power has been one of several grievances in Oaxaca.  In Baja California, gas co-generation plants to provide electrical power to southern California are also likely to be affected.

PEMEX is one of the largest oil companies in the world, much larger than Exxon-Mobile.  This issue has been under the radar in the United States, which depends much more on Mexican oil than it does on Venezuelan supplies.  All these reforms point to more Mexican use of Mexican oil reserves, and — even if new wells are drilled — the rules are going to change.  There hasn’t been much attention paid to PEMEX from the U.S. press, and I expect if there is any mention, it will be more in the “holy shit, when did that happen?” vein.

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