Mexico to invest $ 120 bn to meet growing energy demands

Nov 01, 2001 01:00 AM

The Mexican government made a careful call for modernisation and private investment in the country's undercapitalised energy sector. During the unveiling of its five-year energy plan, and amid repeated assurances it would not privatise state-owned oil and electricity monopolies, the administration of President Vicente Fox said it would need to invest $ 120 bn (£ 84 bn) by 2006 -- double the amount invested by the previous government -- to meet growing demands.
The government repeated its goals to turn Pemex, the world's seventh largest oil producer, and the Federal Electricity Commission, the sixth largest electricity generator, into internationally competitive companies to reduce the sector's increasing dependence on imports and boost exports.

The measures included greater autonomy for the monopolies' boards of directors and a lighter fiscal load. Pemex pays more than 100 % in taxes, while in recent years its contribution to total government revenues has increased from 24 to 37 %. More controversially, the government is proposing to allow private investment in electricity generation and the production of dry gas, which is not associated with oil. It also wants to open up petroleum and gas refining.
Since 1984, Mexico's oil and gas reserves have gradually declined, with the country currently importing 11 % of its natural gas and 26 % of its gasoline. Over the next six years, demand for natural gas alone is expected to increase by 80 %. "These measures are sufficient to preserve Mexico's energy sovereignty," said Mr Fox, adding that they were "vital for the aspirations of economic growth and social justice of this country".

According to industry analysts, however, the vague proposals offered "nothing new" and fell well short of laying down the groundwork for greater private investment in the sector. "There was no clear commitment to much greater private sector involvement in the short term," said David Shields, a Mexico City energy analyst.
Members of Mr Fox's National Action partyhave hinted that they plan to present an energy sector reform to Congress this month. The reform would seek to break the state's constitutional monopoly over the exploration and production of oil and natural gas.

Source: FT.com _______________________________________________________________________
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