MEXICO CITY (Reuters) - Mexican President Enrique Pena Nieto is set to announce a comprehensive energy overhaul this week as he tries to staunch state oil monopoly Pemex's sliding output and boost growth in Latin America's second-largest economy.
But the task of rebooting Mexico's energy sector is fraught with challenges and Pena Nieto must walk a tight-rope between opening up the restrictive constitution and triggering mass protests from nationalist opposition groups.
Pena Nieto is likely to tweak articles of the constitution that prohibit private ownership of Mexican oil - a key road bump in attracting the oil major investment seen as essential to fully exploiting Mexico's abundant, often deep-water, reserves.
While there are doubts over how far the government reform will go, with key ruling party figures said to be weighing the political cost of a truly transformative revamp, the need for change is clear.
Below are some facts about the lumbering oil, gas and electricity sectors - all targets of what analysts say is Mexico's most ambitious economic policy shift since the signing of the North American Free Trade Agreement in 1994:
* Mexico is the world's 10th biggest producer of crude oil, according to OPEC data, yet output has fallen by a quarter since hitting a peak of 3.4 million barrels per day in 2004.
* The country is also a top oil exporter to the United States but has to import nearly half of its gasoline due to a lack of domestic refining capacity.
* The United States is still by far Mexico's largest oil export destination, but shipments have halved since 2006 to less than 850,000 bpd this year, according to U.S. government data. That is the lowest rate in two decades due to both declining Mexican production and rising U.S. output.
* Pemex places its long-term hopes of boosting production on the deep waters of the Gulf of Mexico, where it believes there are up to 29 billion barrels of crude oil equivalent, more than half the country's potential oil resources.
* Pemex's international oil trading arm, PMI Comercio Internacional, is betting on boosting exports to China and India in coming years as it seeks to diversify sales away from an increasingly energy-independent United States.
* Mexico also has the world's fourth-largest shale gas reserves, an estimated 681 trillion cubic feet of recoverable gas resources in deposits that may contain rich pockets of both natural gas and oil, according to U.S. Energy Information Administration data.
* The Mexican government relies on oil revenues to fund about a third of the federal budget. The heavy tax burden has limited Pemex's ability to fund new projects and lift output. The government warns that Mexico could become a net oil importer as early as 2018 if major new oil finds cannot be developed.
* Any major reform will likely involve rewriting Article 27 of the constitution, which bans the government from granting private sector concessions for oil or gas, making their exploitation the sole preserve of the Mexican state.
* Other key articles that might be reformed include 25 - to give Pemex more operational independence - and 28 - to ease curbs on private capital in the petrochemical industry. If it modifies Article 27, the government would open the door to risk contracts, allowing private companies to participate directly in the exploration and production of crude oil.
* It is not just Mexico's oil and gas sectors which would be affected. Mexico's state-run electricity utility, CFE could also face reform aimed at easing costs for the industrial giants it supplies.
* CFE currently controls all aspects of the sector, while other government officials led by the Finance Ministry set rates and subsidies. Experts say electricity rates could drop by as much as half if CFE were dismantled, triggering more competition and private power generation.
* Pemex was formed in 1938 when President Lazaro Cardenas expropriated British and U.S. oil companies' Mexican assets to forge one of the world's largest state-run oil monopolies.
* In recent years, Pemex has struggled under a weighty fiscal burden, corruption, politicking and oil theft. Since 2011, Mexican crude oil output has been surpassed by Iraq, Kuwait and the United Arab Emirates, OPEC data shows.
yahoo.com
But the task of rebooting Mexico's energy sector is fraught with challenges and Pena Nieto must walk a tight-rope between opening up the restrictive constitution and triggering mass protests from nationalist opposition groups.
Pena Nieto is likely to tweak articles of the constitution that prohibit private ownership of Mexican oil - a key road bump in attracting the oil major investment seen as essential to fully exploiting Mexico's abundant, often deep-water, reserves.
While there are doubts over how far the government reform will go, with key ruling party figures said to be weighing the political cost of a truly transformative revamp, the need for change is clear.
Below are some facts about the lumbering oil, gas and electricity sectors - all targets of what analysts say is Mexico's most ambitious economic policy shift since the signing of the North American Free Trade Agreement in 1994:
* Mexico is the world's 10th biggest producer of crude oil, according to OPEC data, yet output has fallen by a quarter since hitting a peak of 3.4 million barrels per day in 2004.
* The country is also a top oil exporter to the United States but has to import nearly half of its gasoline due to a lack of domestic refining capacity.
* The United States is still by far Mexico's largest oil export destination, but shipments have halved since 2006 to less than 850,000 bpd this year, according to U.S. government data. That is the lowest rate in two decades due to both declining Mexican production and rising U.S. output.
* Pemex places its long-term hopes of boosting production on the deep waters of the Gulf of Mexico, where it believes there are up to 29 billion barrels of crude oil equivalent, more than half the country's potential oil resources.
* Pemex's international oil trading arm, PMI Comercio Internacional, is betting on boosting exports to China and India in coming years as it seeks to diversify sales away from an increasingly energy-independent United States.
* Mexico also has the world's fourth-largest shale gas reserves, an estimated 681 trillion cubic feet of recoverable gas resources in deposits that may contain rich pockets of both natural gas and oil, according to U.S. Energy Information Administration data.
* The Mexican government relies on oil revenues to fund about a third of the federal budget. The heavy tax burden has limited Pemex's ability to fund new projects and lift output. The government warns that Mexico could become a net oil importer as early as 2018 if major new oil finds cannot be developed.
* Any major reform will likely involve rewriting Article 27 of the constitution, which bans the government from granting private sector concessions for oil or gas, making their exploitation the sole preserve of the Mexican state.
* Other key articles that might be reformed include 25 - to give Pemex more operational independence - and 28 - to ease curbs on private capital in the petrochemical industry. If it modifies Article 27, the government would open the door to risk contracts, allowing private companies to participate directly in the exploration and production of crude oil.
* It is not just Mexico's oil and gas sectors which would be affected. Mexico's state-run electricity utility, CFE could also face reform aimed at easing costs for the industrial giants it supplies.
* CFE currently controls all aspects of the sector, while other government officials led by the Finance Ministry set rates and subsidies. Experts say electricity rates could drop by as much as half if CFE were dismantled, triggering more competition and private power generation.
* Pemex was formed in 1938 when President Lazaro Cardenas expropriated British and U.S. oil companies' Mexican assets to forge one of the world's largest state-run oil monopolies.
* In recent years, Pemex has struggled under a weighty fiscal burden, corruption, politicking and oil theft. Since 2011, Mexican crude oil output has been surpassed by Iraq, Kuwait and the United Arab Emirates, OPEC data shows.
yahoo.com
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