It's deja vu all over again in Mexico as the legislature readies to debate whether to reform the country's national oil company.

Mexico President Felipe Calderon, who took office in 2006, is trying to do something predecessor Vicente Fox mostly failed to do for six years, i.e., reform Petroleos Mexicanos (Pemex), the state-run monopoly (see NGI, Nov. 13, 2000). Calderon was the energy minister under Fox for nine months, stepping down to begin his bid for the presidency, but whether his free-market, Harvard-educated credentials will help reform Pemex remains a question.

Despite the growing success of national oil companies worldwide, Mexican lawmakers have permitted only limited outside investment in the energy sector. Calderon presided over Pemex's first multiple service contract (MSC) bids in late 2003, which allow private companies to contract for work within Mexico's nonassociated natural gas exploration (see NGI, July 21, 2003).

At the time, the implementation of the MSCs, which have been focused in the Burgos Basin, were considered a win for Fox and his administration. However, because the MSCs do not allow the private companies to actually own any of the assets, they have not garnered a lot of support from energy companies headquartered outside Mexico.

Pemex, which is one of the largest oil producers in the world, actually has to import about 20% of its natural gas. In 2007 Pemex reported that gas production rose slightly but crude oil output was off because of weather events and declines at its Cantarell field. In addition, there were some pipeline explosions that crippled operations, particularly in the Veracruz area.

Calderon last year promised that Pemex would "always continue to belong to all Mexicans," and he said the country could begin to replace 100% of its reserves with legislative changes and without foreign investment by eliminating widespread corruption and upgrading infrastructure (see NGI, March 26, 2007).

Now, however, Calderon's conservative party is pushing to allow more private investment in parts of Mexico's energy sector. In a speech in January Calderon announced that Pemex would have a $20 billion boost to its budget for exploration and production this year, but he cautioned that the company still needed more money to ensure it could replace reserves.

"Clearly we need much, much more investment," Calderon said, "to guarantee the country's development for the coming decades."

Will he and his minority National Action Party succeed? The answer likely rests with the majority opposition, the Institutional Revolutionary Party (PRI), which has consistently fought back attempts to revise Pemex's monopoly structure. Mexico's Senate is expected to take up the debate this spring.

In an interview with Mexico's Excelsior newspaper, PRI Sen. Manlio Beltrones agreed that Pemex needed to be reformed.

"The modernization should be sent in a package that includes measures to improve competition," Beltrones said. However, he added that the package needed to have legislation to "keep monopolies from forming."

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