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Pemex Says Court Rulings Favor Continued Use of MSCs for Foreign Developers

Mexican legislators challenging the multiple service contracts (MSC) enacted by Petroleos Mexicanos (Pemex) two years ago appear to have lost court battles to prevent foreign investment through this type of contract in the country's natural gas resources. Pemex said last week two of the four demands have been resolved in its favor, and two more favorable rulings are expected.

Besides the favorable court rulings concerning the legislators' lawsuits, Pemex also received a favorable ruling in a lawsuit filed by non-unionized workers against the first of the contracts tendered.

After President Vicente Fox was elected in 2000, Pemex pushed for legal reforms to permit more foreign investment to exploit the country's vast oil and natural gas reserves, but the proposals have met with limited success. Despite criticism from the opposition party, Pemex in 2003 began taking bids from Mexican and foreign oil companies for 15- and 20-year MSCs, which allow private companies to develop -- but not own -- gas reserves in the Burgos Basin of northeastern Mexico (see NGI, Oct. 20, 2003).

Since the lease bids were first tendered in 2003, Pemex has awarded about a dozen contracts to explore blocks within the Burgos Basin. However, the MSCs have been constantly challenged in court, and many private companies have been wary about participating. With the legality of the program in limbo, Pemex suspended it earlier this year, and requested Congress enact legislation to regulate MSCs (see NGI, June 27).

A Pemex spokesman on Monday told NGI he did not know whether the latest court rulings would lift the suspension. However, Pemex said in a statement Sunday, "With the favorable results obtained in the judgments...Pemex will be able to continue carrying out new tenders for the purpose of increasing the national production of gas and to reduce thus the costly imports." With outside investments of about $140 million, between April 2004 to October 2005, Pemex said the MSCs have resulted in 69 wells producing 106 MMcf/d.

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