PRI Candidate Mota Suggests Pemex Sell Stake upstreamonline.com
go to original April 14, 2012

Josefina Vazquez Mota: Sees role for private investment in Pemex (Reuters/Scanpix)

Mexico's ruling party presidential candidate Josefina Vazquez Mota said this week that oil monopoly Pemex should consider floating a minority stake, adding to calls for a more radical reform of the state-controlled giant.

Vazquez Mota, a member of President Felipe Calderon's National Action Party (PAN), proposed selling up to 49% of the oil company, an icon of Mexican self-sufficiency since the industry was nationalized in 1938, Reuters reported.

Pemex regularly operates at a loss, with the government taking the bulk of its revenues in taxes to help fund around a third of the federal budget. The oil giant also labors under a huge pension liability for its 150,000-strong workforce.

The PAN candidate, running a distant second in the race to win the 1 July presidential election, told supporters in the industrial city of Monterrey that Pemex must become more competitive and operate like a "modern public company".

"To achieve this we must bolster public funds with citizens' bonds and should seriously consider floating less than 51% of the firm's shares on the stock exchange, a model like the one Brazil followed on energy policy," Vazquez Mota said according to the news wire.

Her comments came days after presidential front-runner Enrique Pena Nieto of the centrist opposition Institutional Revolutionary Party (PRI) told Reuters he wanted Pemex to emulate the success of Brazil's Petrobras.

The Brazilian state giant gradually opened to private investors in the 1990s and improved efficiency.

The idea of issuing citizens' bonds  -  or Pemex debt securities sold to Mexican nationals that grant returns based on company performance  -  was proposed in 2008 by Calderon's administration, but have not yet materialized.

In a December interview with Reuters, Vazquez Mota proposed a possible listing of Pemex shares.

A listing would expand on a 2008 reform that opened the oil sector to more private contracting. Pemex awarded its first-ever private operating contracts for three mature fields last August and a second round is expected later this year.

But analysts and investors say further changes are needed to lure firms into the oil-rich waters in the Gulf of Mexico, which hold an estimated 29 billion barrels of crude equivalent. Hefty investment, top-notch technology and better regulation will all be required for Pemex to successfully tap those resources.

Output will stagnate at around 2.8 million bpd over the next 14 years unless Pemex ramps up spending on exploration and production, the government said in February.

The third placed presidential contender, leftist Andres Manuel Lopez Obrador, is opposed to handing over any more of Pemex to private investors, and has proposed building more refineries to reduce gasoline imports.

Mexico is a top crude exporter to the United States but has to import more than 40% of is gasoline needs because of a lack of local refining capacity.

The world's No. 7 oil producer has managed to stabilize output at around 2.5 million barrels per day (bpd) after a dramatic drop at its largest fields but needs more investment if it wants to avoid becoming a net crude importer in the future.

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