Calderon Vows to Renew Drive in Congress to Boost Pemex Output
May 10, 2011, 8:52 PM EDTBy Jose Enrique Arrioja and Carlos M. Rodriguez
May 10 (Bloomberg) -- Mexican President Felipe Calderon said he plans to sell bonds issued by Petroleos Mexicanos to his countrymen and renew a drive in Congress to give the state-run oil producer the tools it needs to boost output.
The government has no plans to sell shares in Pemex, Calderon’s office said in a statement. Earlier today, in an interview with Bloomberg television in New York, Calderon said a share sale for Pemex “could be an alternative” as part of his campaign to modernize the 73-year old company.
New legislation Calderon plans to present to Congress which convenes in September would seek to remake Pemex along the lines of Brazil’s Petroleo Brasileiro SA or Norway’s Statoil ASA, Calderon said at Bloomberg headquarters in New York.
“My plan is to try another legal reform in order to modernize Pemex in a way similar to what Petrobras did 10 years ago,” said Calderon, a former energy minister. “It’s going to be difficult, but I think we are moving the perception of public opinion of how important it is to modernize the enterprise.”
Pemex, Latin America’s largest oil producer, is offering foreign oil companies performance-based contracts as it seeks technologies to extract oil from mature fields and stem six straight years of declines. The company plans to invest about $23 billion this year to boost output. Production fell to 2.576 million barrels a day in 2010, from a daily average of 3.4 million when Calderon was energy minister in 2004.
2008 Debate
In 2008 Calderon pushed through Congress a bill to allow Pemex to offer exploration and production contracts to private companies and to sell so-called citizen bonds to raise capital among the Mexican public. The contracts were delayed several times after being challenged by some lawmakers in the Supreme Court, and opponents watered down another bill to promote more foreign investment in Mexico’s oil industry.
The Mexico City-based company’s investment budget has surged 145 percent since 2006. Production has fallen 19 percent in the same period, while proven reserves declined from 16.5 billion barrels in 2006 to 13.8 billion barrels last year, according to a presentation on the company’s website.
Calderon said that Pemex is preparing the sale of its so called Bonos Ciudadanos, securities similar to trust certificates that yield dividends.
Lawmakers from the Institutional Revolutionary Party, or PRI, Mexico’s largest opposition party, proposed in February to reduce the tax burden for Pemex by 50 billion pesos ($4.33 billion) annually.
Petrobras first sold shares to the public in December 1957 on the Rio de Janeiro stock exchange, which no longer exists, and has soared more than sixfold in the past decade. The company raised as much as $70 billion in the world’s largest share sale in September to help finance its $224 billion investment plan, intended to tap the largest oil finds in the Americas in three decades.
Monopoly
In 1938, Mexico’s President Lazaro Cardenas seized the assets of companies that later became Chevron Corp. and Exxon Mobil Corp., the world’s largest oil company. Mexico created Pemex later that year. It prohibited private and foreign companies from exploring or producing oil until October 2008 when the law was revised. Pemex is the only domestic refiner.
Pemex would benefit from following the path of Brazil’s state-controlled Petrobras and selling a stake to the public, said Luis Tellez, chairman and chief executive officer of Bolsa Mexicana de Valores SAB in an interview late last year.
BP Plc, Europe’s second largest oil company, and Repsol YPF SA are among about 30 companies paying almost $30,000 to acquire bidding rules and access to the data room for the first round of the performance-based contracts that Pemex is offering to work on three fields in the southeastern state of Tabasco.
The yield on the Pemex 10-year U.S. dollar bonds fell 1 basis point, or 0.01 percentage point, to 4.857 percent. The price of the security rose 0.07 cents to 108.11.
Gasoline Prices
Calderon, 48, said he has no plans to change the government’s policy of gradually raising domestic gasoline prices because the two-year oil rally is a “bubble” that will fade.
“I cannot see higher prices in terms of commodities. My perception is that very soon we are going to see some kind of peak on that,” Calderon said. “We need to increase this clearly and we can do that gradually. It’s the right policy right now.”
Mexico’s Finance Ministry increased local unleaded gasoline prices 2.7 percent in the first quarter after boosting them 12.7 percent in 2010 while crude oil surged 34 percent in New York trading over that time. The Finance Ministry sets prices on gasoline sold by state-controlled Petroleos Mexicanos, which supplies all filling stations in the country.
At 9 pesos a liter, Mexican gasoline costs the equivalent of $2.94 a gallon, or 26 percent below the $3.95 average in the U.S. reported by AAA, the country’s biggest motoring association.
--With assistance from Julianna Goldman in New York City, and Adriana Lopez and Andres R. Martinez in Mexico City. Editors: Carlos Caminada, Dale Crofts
To contact the reporter on this story: Jose Enrique Arrioja at jarrioja@bloomberg.net Carlos M. Rodriguez in Mexico City at carlosmr@bloomberg.net.
To contact the editor responsible for this story: Dale Crofts at dcrofts@bloomberg.net.
