Mexico City (Platts)--9Apr2008

Mexico's President Felipe Calderon Tuesday night said in a nationwide
broadcast that the country's energy reforms would respect the Constitution,
thus ruling out contracts that involve production-sharing, as Mexico's
Constitution regards all oil and natural gas deposits as state property.
But, Calderon, who vigorously defended the energy reforms sent to the
Senate earlier in the day, raised the prospect of more private sector
participation in areas of the industry traditionally reserved for the state,
including refining.
Though he did not say how it would be done, Calderon said the reforms
would boost deepwater drilling. "The oil is ours and we're going for it."
Mexico's neighbors -- Cuba and the US -- are currently exploring and
exploiting their deepwater reserves.
Calderon also said that "specialist companies" would be invited to build
and operate new refineries in the country, though "their products will be
Mexico's." Imports now account for 40% of Mexican gasoline consumption.
Without going into detail, Calderon said that state-owned Pemex -- which
has a monopoly over gasoline retailing, exercised through gasoline station
franchises open only to Mexicans -- would be freed from the restrictions of
the Public Works Law that senior Pemex executives have frequently described as
putting a strict limit on their actions.
Under the law, contractors have to quote a price, and stick to it,
restricting their ability to modify the deal as new opportunities arise.
George Baker, Houston-based consultant of the Energia.com consultancy,
said recently that "the Public Works Law is a bar on cutting-edge technology.
By definition, no price can be placed in advance on cutting-edge technology
because nobody has ever tried it before."
Calderon also said that, to put meat on the bones of the claim that Pemex
belongs to all Mexicans, bonds would be issued that would enable anyone to
have a stake. "But these will not be stocks or shares," he emphasized.
Each bond would have a value of Peso 100 (less than $10) and any Mexican
could buy one or more. "But we will ensure that limits will be placed on the
issue so a handful of people won't be able to snap up all of them," he said.
Calderon added that the reforms would benefit everyone in Mexico. "If the
reforms are approved by Congress, we will be able to ensure access to
education and full health cover for every Mexican," he said.