Pemex Chief Says Govt Mulling Concessions on 2Tcf of Ga

Sept 14, 2005 (Dow Jones Commodities News via Comtex) -- By Anthony Harrup Of DOW JONES NEWSWIRES MEXICO CITY (Dow Jones)

The head of Mexican state oil monopoly Petroleos Mexicanos (PEM.YY), or Pemex, said Tuesday that natural gas concessions being proposed by President Vicente Fox could cover reserves for an estimated 2 trillion cubic feet.

On Monday, Fox said he plans to propose a change in the constitution to allow private companies to explore for and produce natural gas, an activity which has been reserved to the state since 1938.

Constitutional changes in Mexico require a two-thirds vote in the Congress, and approval by state congresses.

At a press conference Tuesday, Pemex chief Luis Ramirez Corzo said the plan would focus on non-associated natural gas reserves mostly in northeastern Mexico, but also in the Gulf coast states of Veracruz and Tabasco.

The idea would be to tender blocks of reserves, although Pemex would remain in control of the sale of the gas, Ramirez said. He added that the way in which income would be distributed is still to be defined.

In an attempt to close the growing gap between domestic demand and production, in 2003 Pemex began granting multiple-service contracts to private companies to develop gas reserves in northeastern Mexico.

But the 15-year to 20-year contracts, with set prices for work done, offered no risk benefits to contractors and failed to generate interest among oil majors.

The opposition response to Fox's latest bid for some kind of reform in the state-run energy sector before his term ends in December 2006 suggests it won't get any further than previous attempts.

The left-wing Democratic Revolution Party, or PRD, cried "privatization" and ruled out support. Emilio Chuayffet, congressional leader of the country's largest party, the Institutional Revolutionary Party, or PRI, said the party could consider changes in secondary laws, but not a constitutional amendment.

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