December 3, 2010 / 12:31 AM / 9 years ago

UPDATE 1-Mexico court rejects part of Pemex law challenge

* Supreme Ct discussion of Pemex lawsuit to resume Monday

* Lawmakers challenging private oil contracts (Recasts, updates with details on the court vote)

By Tomas Sarmiento

MEXICO CITY, Dec 2 (Reuters) - Mexico’s Supreme Court voted on Thursday to uphold some rules permitting state oil monopoly Pemex to contract with private companies but said deliberations will continue next week.

“We will resume discussion of this issue next Monday,” Chief Justice Guillermo Ortiz said at the end of the court session.

Congress passed legislation in late 2008 opening the door to Pemex [PEMX.UL] to hire private companies as contractors.

But the lower house voted in October 2009 to challenge the regulations implementing the law, claiming the government overstepped its authority and that the rules gave too much control over the industry to the private sector.

The Supreme Court is discussing the legal challenge, and Pemex said on Twitter that the Thursday vote “declared constitutional the regulations ... for the new contracts.”

But a spokesman for Pemex told Reuters the company would wait until a final ruling is released before giving a formal response.

Private investors have been barred from Mexico’s oil sector since its nationalization in 1938, but Mexican President Felipe Calderon says private companies are needed to help reverse slumping oil output.

The court ruling could open the door to significant foreign investment and outside know-how as Mexico tries to exploit hard-to-reach reserves.

The state oil company hopes private companies will help it modernize production and boost crude output from older fields by up to 150,000 barrels per day.

Pemex said last week it plans to offer three contracts that would turn over mature oil fields to private operators. [ID:nN25277387]

Involvement of the private sector in the oil industry remains contentious in Mexico, where many people view national control of the energy industry as an emblem of sovereignty.

Mexico, the world’s No. 7 oil producer, relies on crude oil exports to fund around a third of the federal budget, but years of underinvestment in exploration have left it with few options to quickly replace production capacity lost at its aging oil fields such as the super-giant Cantarell complex.

International oil producers like Exxon Mobil Corp (XOM.N), BP Plc (BP.L) and Repsol (REP.MC) have been eyeing Mexico closely, although some analysts believe smaller companies may be more interested in the first round due to the small size of the fields on offer. (Additional reporting by Mica Rosenberg; Editing by Mica Rosenberg)

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