Pemex Opens Up Exploration in its Burgos Field

Pemex hopes to attract approximately 70 billion pesos ($7.75 billion) in private investment in the first round of tenders to explore the Burgos natural gas field. Service contracts allowing private investment in Mexico's energy sector would secure expertise and advanced technology in developing production programs, Petroleos Mexicanos head Raul Munoz told a forum at the American Chamber of Commerce in Mexico. Munoz has been trying to push the idea of multiple service contracts for gas exploration and production but has met with strong resistance from legislators who see the contracts as privatization of the industry through the back door. "The service contracts represent public investments because they belong to Pemex but they would be financed and carried out by private firms which would bring funding, know-how and technology," Munoz said.

Munoz has stated the need for Mexico to have an efficient, reliable, flexible and competitive fossil fuel sector, not an overprotected industry in which its potential development was inhibited. Munoz has repeatedly warned that the sector was verging on crisis and needed to reverse a decline in investment to prevent drastic falls in oil and gas production.

Congress granted Pemex an unusually generous budget for 2002 of 218 billion pesos ($24 billion) which Munoz has said would go some way to improving the sector's productive outlook. He stressed that within the framework of the existing law, there would be greater opportunities for growth in alliance with national and foreign companies. "Only a weak company could be afraid of them. A strong company should take advantage of them (outside help of private companies)," he said. Munoz stressed that private investment did not mean canceling Pemex's important social function in the nation's economic development.

According to Article 27 of the constitution, which is widely cited by opponents of opening up the sector, Mexico would retain ownership of the fruits of the soil and subsoil, payment to foreign companies would be in cash not in kind, and companies could not have a stake in the final product nor receive a portion of oil or gas found in payment, Munoz said. He said it was currently possible for private companies to invest in transport, storage, distribution and sale of natural gas, petrochemicals and service stations for selling petrol, diesel, oils and other products. But Munoz stressed that the separation of contracts related to drilling, developing and expanding its fields meant huge administrative efforts that could be made more efficient. He said he would make public his definitive version of future service contracts at the end of the third quarter with a view to opening them to bidding at the end of this year.