Thursday, April 17, 2008

Mexico's Energy Reform

From the Economist's 'Regeneration' (12-Apr)

Mexico's President Felipe Calderon announced plans for much needed reforms to Pemex, Mexico's state-owned oil company. The reforms would "give Pemex greater budgetary autonomy and strengthen the regulaory apparatus". Pemex would be "allowed to hire private contractors for distribution and storage" and would enable private contracting of refining. The reform also includes a bond for new refineries.

As a state owned oil company, Pemex's profits provide a significant portion (40%) of Mexico's annual income - income that would otherwise be used for exploration, capital development, etc. in private industry. As a result of the state's reluctantance to relinquish any of its income source to Pemex, oil reserves are running out, production has dropped some 10% in the last three years, and its technologies have become obsolete.

It would appear however that Pemex is about to recieve a sorely needed influx of cash and reforms. Perhaps Mexico's government has realized that for its cash-cow to keep giving it needs greater financial autonomy.

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