Sempra Energy and Calpine Corp. remain bullish on investments in Mexico’s energy industry despite concerns about whether the next national political administration in Mexico City will be as friendly toward private-sector investment in the country. Skeptics cite Mexico’s historic nationalization of the oil/gas exploration and development industry in the late 1930s.

Nancy Conroy, a newsletter publisher and energy observer in Mexico wrote in a column published last week that expropriation is always in the back of some observers’ minds in looking at the longer-term political and economic developments in the country. Current President Vicente Fox will leave office in two years, and Conroy raised the rhetorical question of whether Sempra’s LNG receiving terminal in Baja California could be running a risk of expropriation, given Mexico’s history?

Conroy said that her reading of Mexican law indicates that “energy and gas projects” are “off limits” to foreign participation, and that the Fox Administration, with its pro-foreign private investment philosophy, has simply “overlooked” the law. However, Sempra’s reading is that the only prohibition still on the books is against foreign exploration and production (E&P) of oil and gas, and that distribution, transmission and storage of energy are all legal by foreign, private investors, a Sempra spokesperson said Tuesday.

Conroy said the key current law is the 1994 “new Foreign Investment Law,” outlining percentages of foreign ownership permitted in various categories of projects. “I doubt that anyone is lobbying to change this law, but if they are, they are no doubt financed by the gas companies,” Conroy told Daily GPI. “Anyone trying to enact changes to this law will doubtless encounter that nationalistic fervor, which is a strong force to be reckoned with.”

As publisher of a North Baja newsletter, “Gringo Gazette,” Conroy contends that there is growing dissent by Leftist parties in Mexico City toward foreign private investment in energy projects. She cites Manuel Lopez Obrador, the current Mayor of Mexico City and possible national presidential candidate, as among the political leaders against several proposed LNG plants in North Baja.

She is predicting that later this month (on March 18), local and national LNG foes are going to mark Mexico’s expropriation of the oil/gas industry by demonstrating against the projects for both environmental and national economic reasons.

“What nobody seems to be talking much about is the scary similarity between these (new gas and electric) projects and U.S. investment in the Mexican petroleum industry in the 1930s,” Conroy wrote in her recent newsletter column.

Sempra’s spokesperson reiterated Tuesday that construction of the LNG receiving terminal is fully under way, and no protestors have tried to block the work. The company fully expects the 1 Bcf/d natural gas facility to be operational in late 2007 or early 2008.

Similarly, Calpine’s 525 MW, natural gas-fired Valladolid III power plant on the Yucatan peninsula is well under way and expects to be in commercial operations in June 2006. Calpine holds the 45% interest in the plant.

So far, opposition groups are not holding up either project, and Conroy confirmed that the LNG project, at least, is going forward. “Sempra obtained favor in Ensenada (12 miles south of the terminal site) by creating a multi-million-dollar ‘fund,’ which is to be spent for education, infrastructure, government programs, etc.,” Conroy said. “Critics called this ‘fund’ a payoff.”

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