April 2, 2014 / 5:32 PM / 4 years ago

Mexico bill to propose forced Pemex stake in cross-border deposits -report

MEXICO CITY, April 2 (Reuters) - Mexico’s government plans to propose that state oil company Pemex be obliged to take at least a 20 percent investment stake in any deposits that straddle the country’s borders, under the fine print of a major energy overhaul, local newspaper El Economista reported on Wednesday.

The paper said the government had finished writing at least two sections of the so-called secondary legislation that will implement the sweeping energy reform passed by Congress last year.

The completed laws include a rewrite of Mexico’s Hydrocarbon Law, which will govern production and regulation, and the Federal Electricity Commission Law, which will make changes to Mexico’s state-owned electric company CFE, El Economista said, citing documents.

“The obligatory participation will be at least 20 percent,” the paper cited one document as saying. It added that the document did not specify whether the cross-border fields in question were oil or natural gas, onshore or offshore.

The Energy Ministry said it could neither confirm nor deny the report.

David Penchyna, head of the Senate’s energy committee and a top lawmaker with the ruling Institutional Revolutionary Party, told Reuters the documents had not been drafted by the government but declined to comment when asked about any obligatory participation for Pemex.

The energy overhaul signed into law by President Enrique Pena Nieto late last year ended Pemex’s 75-year monopoly on crude production and paved the way for first-ever joint ventures with foreign oil majors.

The reform opens up the possibility of a range of contracts extending from profit-sharing, production sharing and licenses. It is also seen as an engine of future growth in Latin America’s No. 2 economy.

Industry analysts say mandatory stakes in some oil and gas projects are not uncommon but can distort the market.

“Any regulation that forces the participation of Pemex in a particular project interferes with the market and would be wrong to do. But the fact is that this type of legislation is used in many oil and gas producing countries,” said Luis Miguel Labardini, an oil analyst with Mexico City-based energy consultancy Marcos y Asociados.

It is unlikely that Mexico will be developing any cross-border oil and gas deposits from either shale or deep water areas in the near-term given the complexity of proving such fields.

Pemex has sent a list of the oil and gas fields it wants to keep under a so-called “Round Zero” allocation to the energy ministry. Fields that are not set aside will be offered up to private firms in public auctions expected to be held next year, in which Pemex can also compete.

Pemex has asked to keep deep water exploration areas in the Perdido Fold Belt and the Lakach gas field project under a landmark energy overhaul, board member Fluvio Ruiz told Reuters last week.

Two Mexican congressional officials said on Tuesday that the approval of eagerly-awaited details of the landmark energy reform will likely be delayed until at least May, meaning Congress would have to call a special session to debate it. (Reporting by David Alire Garcia and Ana Isabel Martinez; Editing by Simon Gardner and Tom Brown)

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