Mexico’s government is proposing a $16 billion infusion into its energy sector in 2004, which would include $10 billion alone for the state-run oil and gas monopoly Petroleos Mexicanos (Pemex).

The budget proposal was submitted to Congress on Thursday, and if approved, it would be the highest for the country’s energy sector in the past five years.According to the Pemex proposal, $3.5 billion would funded internally, while the rest of the budget would be financed investment.

The government is forecasting Pemex’s natural gas output will grow 4.1% to 4.7 Bcf/d in 2004. Crude production is expected to jump 2.4% to 3.5 million bbl/d. Pemex’s budget includes continued investment in gas production projects in the Burgos Basin and at Lankahuasa. It also wants to fund more production from its offshore oil and light crude fields.

Also to be expanded with budget approval would be the state-run electricity sector. The Comision Federal de Electricidad (CFE) proposes to connect 900,000 new users, bringing its total to 22.2 million. The CFE also wants to power up four new generating plants next year, which would add 1,476 MW of installed capacity. CFE now has about 43,000 MW capacity, and 7,000 MW are provided by independent power producers. There are another 15 new power projects also planned, including the $1 billion La Parota hydroelectricity project in southern Guerrero state.

The government also wants to change the way it taxes Pemex, according to Pemex CFO Juan Jose Suarez Coppel. He said the plan, which requires congressional approval, would set different rates for oil than for non-associated natural gas. It would set different tax rates on proven developed reserves and new production projects to help make the new projects profitable. Currently, Pemex pays taxes and royalties that are equivalent to more than 60% of its total sales. In recent years, Pemex has registered after-tax losses even though it has had strong operating results.

Although President Vicente Fox’s support has been flailing, the government’s energy budgets generally have been approved without incident. In the past three years, since Fox has been in office, Pemex’s budget has been doubled from the preceding year.

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