Tuesday, October 28, 2008 5:00 PM
MEXICO CITY -- Leftist lawmakers stormed the podium in the lower house of Congress on Tuesday in a bid to block passage of an oil reform bill aimed at reversing sagging production in Mexico, the third-biggest crude supplier to the United States.
But legislators from other parties held on to the lower part of the podium and continued a session that was widely expected to approve the bill. They loudly read out portions of the bill even as leftist legislators above them waved Mexican flags and shouted, "The homeland is not for sale, the homeland must be defended!"
The bill would allow more private and foreign investment in operations overseen by state-run oil monopoly Petroleos Mexicanos, or Pemex, which lacks the technology and expertise for deep-water exploration in the Gulf of Mexico.
But leftists rallied popular support to limit openings to private investment, calling them a stealth privatization of an industry that was nationalized in 1938.
After months of negotiations, President Felipe Calderon's original proposal has been watered down.
While it will let Pemex keep more of its profits for exploration and development, experts say the measure is not likely to attract the investment needed to boost oil output that has been declining since 2005.
The bill would no longer allow private investment in building and operating oil refineries, and private ownership of storage and transport facilities would be banned. It also allows deep-water exploration only on a straight contract basis, without the results-based bonuses proposed under the original plan.
"They are very much just service contracts and probably not what most people in the sector wanted. But it was what possible politically do in Mexico today," said Enrique Bravo, a Washington-based oil analyst for Eurasia Group.
"Unless there is a major new discovery, with the current regulation that is not very prone for major private participation, I don't see how production can even be kept current levels, let alone be increased," he said.
Falling oil prices and output threaten to slash oil income, which makes up 40 percent of the federal budget, just as Mexico sees falling remittances from U.S. migrants and a plunging peso rattles the long-stable economy.
So far this year, Mexico has produced an average of 2.8 million barrels of oil a day, down 10 percent from 2007 levels. At current production rates, experts say Mexico will blow through its proven reserves in 10 years.
Former President Vicente Fox, a member of Calderon's conservative National Action Party, called the bill a disappointment.
"It's Pyrrhic and small," Fox said in comments published Tuesday in El Universal newspaper. "President Calderon presented complete and profound reform that would have resolved the country's problems of the country and its energy. It would have resulted in a better future for Mexicans."
Still, the government's concessions built consensus on one of the most sensitive issues in Mexican politics. The compromise bill easily passed in the Senate last week, and is widely believed to have the support of most lawmakers in the lower house, despite Tuesday's raucous protest by some members of the leftist Democratic Revolution Party, or PRD.
"Oil politics in Mexico is a lot of about politics and a little about oil," Bravo said. While many people will be disappointed, "Within the political setting in Mexico, it's not a minor achievement."
The protest erupted shortly after former presidential candidate Andres Manuel Lopez Obrador denounced the bill in a speech to the lower house.
"What is at stake is whether we will be a country, or be converted into a colony," Lopez Obrador said.
© 2008 Associated Press. All Rights Reserved
MEXICO CITY -- Leftist lawmakers stormed the podium in the lower house of Congress on Tuesday in a bid to block passage of an oil reform bill aimed at reversing sagging production in Mexico, the third-biggest crude supplier to the United States.
But legislators from other parties held on to the lower part of the podium and continued a session that was widely expected to approve the bill. They loudly read out portions of the bill even as leftist legislators above them waved Mexican flags and shouted, "The homeland is not for sale, the homeland must be defended!"
The bill would allow more private and foreign investment in operations overseen by state-run oil monopoly Petroleos Mexicanos, or Pemex, which lacks the technology and expertise for deep-water exploration in the Gulf of Mexico.
But leftists rallied popular support to limit openings to private investment, calling them a stealth privatization of an industry that was nationalized in 1938.
After months of negotiations, President Felipe Calderon's original proposal has been watered down.
While it will let Pemex keep more of its profits for exploration and development, experts say the measure is not likely to attract the investment needed to boost oil output that has been declining since 2005.
The bill would no longer allow private investment in building and operating oil refineries, and private ownership of storage and transport facilities would be banned. It also allows deep-water exploration only on a straight contract basis, without the results-based bonuses proposed under the original plan.
"They are very much just service contracts and probably not what most people in the sector wanted. But it was what possible politically do in Mexico today," said Enrique Bravo, a Washington-based oil analyst for Eurasia Group.
"Unless there is a major new discovery, with the current regulation that is not very prone for major private participation, I don't see how production can even be kept current levels, let alone be increased," he said.
Falling oil prices and output threaten to slash oil income, which makes up 40 percent of the federal budget, just as Mexico sees falling remittances from U.S. migrants and a plunging peso rattles the long-stable economy.
So far this year, Mexico has produced an average of 2.8 million barrels of oil a day, down 10 percent from 2007 levels. At current production rates, experts say Mexico will blow through its proven reserves in 10 years.
Former President Vicente Fox, a member of Calderon's conservative National Action Party, called the bill a disappointment.
"It's Pyrrhic and small," Fox said in comments published Tuesday in El Universal newspaper. "President Calderon presented complete and profound reform that would have resolved the country's problems of the country and its energy. It would have resulted in a better future for Mexicans."
Still, the government's concessions built consensus on one of the most sensitive issues in Mexican politics. The compromise bill easily passed in the Senate last week, and is widely believed to have the support of most lawmakers in the lower house, despite Tuesday's raucous protest by some members of the leftist Democratic Revolution Party, or PRD.
"Oil politics in Mexico is a lot of about politics and a little about oil," Bravo said. While many people will be disappointed, "Within the political setting in Mexico, it's not a minor achievement."
The protest erupted shortly after former presidential candidate Andres Manuel Lopez Obrador denounced the bill in a speech to the lower house.
"What is at stake is whether we will be a country, or be converted into a colony," Lopez Obrador said.
© 2008 Associated Press. All Rights Reserved