Mexico's Senate Set to Expand State Oil Firm Pemex's Board

MEXICO CITY (Dow Jones Newswires), March 9, 2009

Mexico's Senate is gearing up to approve four independent board members to state-run oil giant Petroleos Mexicanos, the first big step in implementing an energy reform approved last fall.

The Energy Committee has summoned President Felipe Calderon's candidates for a Tuesday meeting to sound out their policy positions. The expanded board faces the monumental task of reversing plummeting oil production during a period when many major oil companies are cutting spending amid the price slump.

Calderon was a month behind schedule in naming his candidates, but observers expect the Senate to approve all four without a battle because they already have broad support from the main parties in Congress.

"The candidates were chosen after a political negotiation that guarantees their approval," wrote columnist Miguel Angel Granados in the Reforma newspaper.

This is an accomplishment in Mexico, where the oil industry is highly politicized after 71 years of a state-run monopoly under Petroleos Mexicanos.

Former PAN President Vicente Fox outraged left-wing politicians back in 2001 when he named top businessmen, including telecommunications and retail magnate Carlos Slim and cement mogul Lorenzo Zambrano, to Pemex's board.

Fox wound up replacing the businessmen with bureaucrats within months following charges that he was looking to privatize the oil industry.

A similar confrontation over the board members this year would delay implementing the reform, which includes a new service contract model designed to attract new players to Mexico's oil industry. The board will also be in charge of drafting regulations and setting up new contract models.

"The main thing is to get on with the work of implementing the reform," said David Shields, a Pemex expert who publishes the Energia A Debate magazine.

Most of the candidates have managerial experience, although none of them are oil industry veterans.

Miriam Grunstein, a lawyer with Thompson & Knight Abogados de Mexico who co-authored a book on Mexico's oil industry in 2008, said it is difficult to find Mexican oil experts who aren't linked to Pemex, which has controlled the oil industry since the 1938 nationalization.

"The sources of oil experts in Mexico is very limited," she said. "They all come from Pemex."

Pemex's other 11 board members are from the federal government and the oil union. The idea behind the expanded board is to make Pemex more transparent by including outsiders.

One of the candidates, Rogelio Gasca Neri, headed the state-run Comision Federal de Electricidad, Mexico's largest power producer and distributor. Hector Moreira comes from Calderon's National Action Party, or PAN. He worked at the Energy Ministry under Fox and was also a researcher at the Tecnologico de Monterrey University.

Jose Fortunato Alvarez, also from the PAN, has mainly worked in state-run financial institutions.

In an apparent attempt to win support from the PRD, Calderon also proposed Fluvio Cesar Ruiz Alarcon, a former adviser to Calderon's political nemesis Andres Manuel Lopez Obrador. Lopez Obrador still claims Calderon beat him in the 2006 presidential election by fraud.

Alarcon has also advised PRD lawmakers on energy issues.

Calderon's olive branch appears to have charmed his enemies.

"They will be magnificent independent members of Pemex's board," said PRD Senate coordinator Carlos Navarette, according to a recent report in local daily El Universal.

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