With rising natural gas demand and underutilized production, Mexico’s state-owned oil and gas monopoly is considering several sources to boost the needed commodity. Along with plans to auction the remaining two Burgos Basin blocks this summer, Mexico also is considering not only siting more liquefied natural gas (LNG) terminals, but importing it as well, according to officials with Petroleos Mexicanos (Pemex).

At an energy conference in La Jolla, CA last week, Luis Ramirez, head of exploration and production at Pemex, told Reuters that the two blocks of the gas-rich Burgos Basin, which failed to draw bidders last year, are set to be auctioned by the end of July. Pemex plans to reduce the size of the blocks and change the contract terms to make them more attractive, he said.

Pemex began auctioning portions of the Burgos last year under its new — and controversial — multiple service contracts (MSCs), which allow private investment in the state-owned oil and gas leases (see NGI, Aug. 11, 2003). A special congressional committee has begun working on the issue of MSCs, and Ramirez said talks so far have been fruitful. With the support of President Vicente Fox, but under attack by oppositional members of the legislature, Pemex auctioned five MSCs for work in the Burgos, but four drew only one bidder each because of the potential legal controversies.

Humberto Cervantes, a member of the legislative Burgos Basin committee, said Pemex is working on a “serious, responsible proposal that provides a solution soon so we don’t spend another two legislatures in legal battles over this issue.” Cervantes told Reuters that the MSCs might not be illegal, but they could be found to be unfairly slanted against Mexican businesses.

“If gas is being exploited in our region, we would like to also be beneficiaries of that progress,” Cervantes said.

But beyond its own untouched gas reserves, Energy Minister Felipe Calderon said that Mexico also has to consider importing LNG in the near future, or it risks remaining dependent on U.S. gas exports at a time when demand is set to soar in North America. Calderon said LNG could be crucial to save Mexico from a future power crisis.

“Mexico cannot depend on gas imported from the United States. We run the risk of cramping growth,” Calderon said. “The United States has a significant deficit in natural gas and it’s logical to think that in a moment of crisis the U.S. authorities will put their own consumers before Mexicans.”

Mexico reputedly has some of the largest oil and gas reserves in the world, but Pemex has under-invested in natural gas, reserving its investment budget for more profitable oil projects. Pemex estimates that only 16% of its potential gas assets have been exploited, and currently, the country imports about 15% of its annual gas needs from the United States.

“It is vital that Mexico, in particular Baja California, diversifies its imports to not be dependent on North American gas but on cheaper gas from other countries, from Indonesia, Australia and Malaysia to Peru and Bolivia,” Calderon said. The Baja peninsula has no pipeline links and depends entirely on U.S. gas imports.

Marcos Ramirez, Pemex’s natural gas chief, noted that possible LNG plants could be sited on Mexico’s Pacific coast to supplant any coming gas shortages. And, Mexico is considering agreements to import LNG from nearby Bolivia or Peru. “We have been approaching different companies to explore the possibility that Peruvian or Bolivian gas could come to the West Coast of Mexico.”

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