With Mexico’s President Vicente Fox weakened politically following the recent national election, opposition lawmakers said last week they would contest a program to tender natural gas production contracts to outside investment. In July, Petroleos Mexicanos (Pemex) unveiled its first package of multiple service contract (MSC) bids on seven blocks of the Burgos Basin (see NGI, July 21).

Pemex estimates that the MSCs could double the gas-rich Burgos’ output to 2 Bcf/d by 2005 or 2006, if an investment of about $8 billion is made. The contracts, introduced as part of a plan to increase foreign investment in the state-run oil and gas industry, have been declared legal by Fox and members of his administration. Pemex officials argue that the contracts would be legal because the state would retain ownership of the gas produced, only paying a set price for the exploration and production services.

However, Mexico Sen. Manuel Bartlett, a member of the Institutional Revolutionary Party (PRI), met with Pemex director Raul Munoz and said the proposed contracts are a “flagrant violation of the constitution” of Mexico. The Mexican constitution bans oil and gas concessions for private companies. “The contracts are production contracts and they are prohibited by the constitution,” Bartlett said. “Why this blind obstinacy? What commitments are leading you to violate the law?”

Bartlett said he hoped Pemex would suspend the tender offers, “because we are going to mount a constitutional challenge.” The senator questioned that if Pemex now could produce 4.5 Bcf/d in the basin, “why do we need foreign firms to come in now?” Pemex has argued that outside investment would nearly double the output to 7 Bcf/d.

Besides opposition by the leading PRI party, the Democratic Revolution Party, or PRD, also has criticized the MSCs because it contends that Pemex is shut out from exploiting gas in the designated blocks, which violates constitutional control over all of Mexico’s hydrocarbon reserves. Combined, the PRD and the PRI have enough votes within the permanent commission of the Mexican Congress to challenge the contracts.

Munoz agreed to meet with a legislative working group to discuss the matter further, however, he did not indicate if Pemex would consider changing the contracts. Pemex, he added, is “open to talks, to listen to other ideas…obviously we don’t agree with most of them.”

©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.