Californication of Pemex in the Works

Tony Abdo aabdo at
Fri Feb 2 00:00:45 MST 2001

Hoopla on the way!     Fox and Bush will meet on February 16, and the
official take is already in.....

Mexico's proud, original, and fiercely independent new president will
'hint' that change is underway!      Washington will express some
consternation about the 'new' proposals coming from Mexico, yet will
adapt a 'wait and see attitude'.      There will be 'differences' over
Cuba, the Drug War, immigration, and Plan Colombia.

All this blather, is a coverup for the increased US push for Mexican
privatization of basic industry.     The real partnership will be
between the tiny Mexican elite that will be offered a share in the
coming profit making, and the US business community.      An independent
Fox?      Hardly.


UPDATE 1-Official sees growing U.S.-Mexico energy links
01 Feb 2001 23:45
(Adds amount of planned new megawatts in para 19, byline.)
By Susan Schneider

MEXICO CITY, Feb 1 (Reuters) - Mexico's unquenchable thirst for natural
gas and California's paltry power supplies will likely foster increased
energy links across the U.S.-Mexican border in coming years, a Mexican
energy official said.
Dionisio Perez-Jacome, head of Mexico's Energy Regulating Commission
(CRE), said in an interview that two or three international firms have
expressed interest in building ducts to bring Mexico the natural gas it
cannot supply from home.

At the same time, a handful of firms are eyeing the construction of new
electricity plants in northwestern Mexico in order to ship energy to
power-starved California, in addition to the two permits already granted
for north-bound energy supplies, he said.

"There is a lot of interest, many companies have asked us what the
procedure would be to obtain the permits" to export power, said
And if the two projects already given the green light do materialize,
Mexico would be poised to send between 500 and 1,000 megawatts to
California within two or three years, he added.

Perez-Jacome, however, said he could not divulge the names of the firms
interested in new gas pipelines or power generation, saying none had yet
made a formal request for a project permit.
The rush to Mexico's 2,100 mile (3,300 km) U.S. border comes as
California confronts a power shortage that has already forced rolling
blackouts across the U.S.' most populous state. Mexico is already
supplying about 50 megawatts of power northward, enough to power only
about 50,000 homes.

The interest in sending natural gas in the opposite direction,
meanwhile, arises from Mexico's inability to meet its domestic needs.
Although Mexico ranks among the world's top 20 nations in gas reserves,
a lack of exploration investment has forced the country to rely
increasingly on U.S. gas imports.

Mexican state oil monopoly Petroleos Mexicanos (Pemex) is moving quickly
to catch up with the gas needs fueled by 6 percent annual growth in
energy demand, said Perez-Jacome. But it is likely that Latin America's
second-largest economy will have to continue imports, he said.
"Demand is growing more than supply so if the tendency continues the way
it is, we will continue to be net importers of natural gas," he said.

Energy officials have said Mexico's gas demand will nearly double
between 2000 and 2008 to 8.231 billion cubic feet per day (cfd).
Imports, meanwhile, reached an average of 231.6 million cfd in 2000, a
surge from the 148.9 million cfd average in 1999.

The California power crisis and new U.S. President George W. Bush's
search for solutions have sparked much talk of energy interconnections
in recent weeks.
Cross-border power links are also likely to figure high on the list of
topics discussed by Bush and Mexican counterpart Vicente Fox at a Feb.
16 meeting at the latter's ranch in central Mexico. It will be Bush's
first foreign trip as president.

But while Bush and Fox are exchanging ideas on energy cooperation,
Mexico must also sort out electricity issues within its own borders.
Analysts say that without an overhaul of Mexico's state-run electricity
system, the nation may face California-style blackouts within three

Perez-Jacome said the new government is working fast to draft an
electricity reform package -- listed by Fox as one of his key priorities
-- in order to lure more private investors to energy generation and
other areas.

"The idea from a regulatory point of view is to have clear, transparent
and efficient rules to attract private investment," said Perez-Jacome,
who added that he expected a proposal to be ready by early March.

Mexico is widely forecast to need $5 billion a year over the next decade
to expand and modernize its 35,000-megawatt electricity grid, under
mounting strain because of the country's breakneck economic growth.

Last year, for example, industrial clients endured 41 unplanned power
cuts so Mexico could avoid broader blackouts, and officials said power
reserves fell to record lows.

A spate of new generators -- some of them built by private companies
under an independent power producer (IPP) scheme -- will add 9,900 new
megawatts by 2004, according to officials.

But the IPP projects may have outlived their usefulness. To qualify for
financing in the government-run system, for example, private companies
have required Mexican government guarantees, resources that could be
used in other areas, said Perez-Jacome.

To avoid the need for guarantees and lure much-needed private cash,
Mexico is eyeing a system in which the state-run electricity firm is
split into divisions that would compete with private generators.
Transmission and dispatch would be independent of generation, but still
under government control, helping to create a market-style system
hosting various players, he said.

"In a sense, the market rules and the regulation will substitute for the
government guarantees," said Perez-Jacome. And the companies "have told
us that they can and they are willing to invest under the scheme we are

COPYRIGHT:  © 2000 Reuters Limited

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