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Pemex delays Burgos bidding Bidding on producing natural gas in Mexico's northeastern Burgos delayed Debra Beachy PN Contributing Writer
Mexico's state oil monopoly Petroleos Mexicanos, or Pemex, is delaying until Oct. 16 the deadline for bids on contracts to produce natural gas in the Reynosa block of the Burgos basin, a source confirmed on Aug. 25. Pemex officials announced the delay of bidding to members of a Texas trade mission, a delegate told Petroleum News on Aug. 25.
The delay comes as Mexican legislators who oppose the deal are challenging its legality. They argue that the so-called multiple service contracts are not legal under Mexico's constitution, which forbids foreign exploration and production of oil resources.
Pemex also announced a change had been made to give only Pemex the exclusive right to decide the location and the pressure of the gas to be delivered by the multiple service contract operators, said George Baker, who owns the Houston-based energy consulting firm, Mexico Energy Intelligence. Exxon, Total, Halliburton attend Pemex officials in Mexico City did not respond to questions about the announcements.
Baker said the meeting, held in the northern city of Reynosa, Mexico, was attended by about 25 Texas legislators and representatives from energy companies, including ExxonMobil, Total and Repsol, Pride International, Tamsa and Halliburton. Goal to double Burgos production The bidding is part of Mexican President Vicente Fox attempts to lure capital investment from foreign companies and double Burgos production by 2006.
The Burgos basin runs along Mexico's northeastern border with Texas through the Mexican states of Tamaulipas, Nuevo Leon and Coahuila. It currently produces 1 billion cubic feet per day of natural gas, about one-fourth of Mexico's yearly production. The bidding is part of Mexican President Vicente Fox attempts to lure capital investment from foreign companies and double Burgos production by 2006.
Pemex officials have said they hope to get up to $8 billion from auctioning off the Burgos contracts, in addition to the $5.9 billion Pemex plans to invest in the area over the next three years.
Although Mexico's president's National Action Party is pushing opening up energy to private investment through the multiple service contracts, it is controversial in Mexico, where school children learn songs commemorating the expropriation of Mexico's oil industry in 1938. Both the Institutional Revolutionary Party and the left-leaning Party of the Democratic Revolution oppose giving any control of Mexico's oil wealth to private companies.
Critics of Fox also have opposed his administration's decision to build electric power plants that are dependent on natural gas for fuel.
They argue that this will make Mexico depend on natural gas imports from the United States. Currently, the production of natural gas in operating fields is declining at about 20 percent a year, Mexican officials have said.
Texas companies hope to step in and fill the gap. Corpus Christi, Texas-based Tidelands Oil & Gas already has received permission from the Federal Energy Regulatory Commission to build a five-mile, 5,000 mcf per day pipeline to carry gas from Eagle Pass, Texas, to Piedras Negras, Coahuila.
In order to meet increased fuel demands, Mexico needs to attract foreign investment because Pemex and the two state-owned utilities, the Federal Commission of Electricity and Luz y Fuerza del Centro, which provides power to Mexico City, contribute so heavily to the government's budget they have little left to spend in investment.
Pemex profits provide a third of the federal government's budget. The Federal Commission of Electricity heavily subsidizes consumer rates.
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