UPDATE - US urges Mexico to allow foreign energy investment
Date: 07-Sep-01
Country: USA
Author: Tom Doggett
U.S. Energy Secretary Spencer Abraham raised the issue this week with Mexican Energy Minister Ernesto Martens, who was in Washington for the state visit of Mexican President Vicente Fox, the official said.
Officials at state oil company Petroleos Mexicanos (Pemex) expects Mexican oil output to decline by one-third in the next five years unless it invests $33 billion in oil and natural gas exploration. Mexico is the second-largest supplier of crude to the United States after Saudi Arabia.
President George W. Bush has proposed measures to boost domestic exploration to keep up with demand for energy and reduce reliance on imports, but analysts expect the plan to meet some opposition in the Senate.
"This is an issue that we're watching closely, because Mexico is a very important supplier of oil to the United States," the U.S. official said of the meeting between Abraham and Martens.
U.S. energy companies are eager to get a piece of the Mexican oil, natural gas and electricity markets, but have been held back by restrictive and sometimes confusing investment rules.
The Fox administration says private investment is needed and it is expected to send an energy reform bill to Mexico's Congress this autumn.
But it is unclear how far Mexican lawmakers will allow private companies into the country's energy sector. Mexico's constitution severely limits foreign investment.
"Clearly this is an issue that Mexico has to decide on its own," the official said.
During his meeting with Abraham, Martens described Mexico's short-term and long-term energy plans.
It was clear during the talks that the Fox administration views as a "central concern" the large amount of investment that will be needed to boost production in the country's energy sector, the official said.
There was discussion about foreign companies expanding the use of "service contracts" with Pemex - mentioned in recent weeks by Pemex officials as a way to lure investment without passing new laws - but Martens did not offer many details on how such deals would work, the official said.
In addition to the $33 billion needed for oil and gas exploration, Mexico also requires some $50 billion over the next decade to expand and modernize its electricity grid and some $20 billion for refining.
Separately, the United States and Mexico renewed a 1996 agreement to cooperate and share information on the development of energy technology and renewable energy sources.
Neither Martens or Abraham spoke to reporters after their meeting.
At the White House this week, Abraham briefed both Bush and Fox on the U.S.-Mexico energy talks, including the status of energy trade between the two countries and developments in each nation's energy sectors.
Last year, Mexico exported an average 1.3 million barrels of crude oil a day to the United States, according to U.S. Energy Department data. Other key international suppliers are Saudi Arabia, Canada and Venezuela.
The Bush administration released a broad-ranging energy proposal in May which called for closer integration of pipelines and electricity transmission lines among the United States, Mexico and Canada.
