MercoPress. South Atlantic News Agency

Mexico presidential front runner wants PEMEX to emulate success of Petrobras

Peña Nieto wants an efficient state oil company which funds a third of the federal budget

Mexico’s presidential front-runner wants state oil monopoly Petroleos Mexicanos (Pemex) to emulate the success of Brazil’s Petrobras and ramp up private-sector involvement that could possibly pave the way for a stock listing in the future.

Enrique Peña Nieto of the opposition Institutional Revolutionary Party (PRI), who has a big lead in opinion polls heading into the July 1 election, said on Monday he wants to help Pemex to grow and make it more efficient.

To expand on a 2008 oil reform that opened the nationalized oil sector to more private contracting, Mr. Peña Nieto said Mexico would need deeper constitutional reform, seen as vital to luring big companies into oil-rich deep waters in the Gulf of Mexico.

But he said Pemex, a cash cow that funds about a third of the federal budget, must remain in the hands of the Mexican state.

The example of Brazil, which gradually opened Petrobras to private investors in the 1990s and introduced reforms that made the company more efficient, serves Pemex well, he said.

“Petrobras’ success has undoubtedly become a great reference. I think there is a lot to learn from that experience,” he said in an interview in Mexico City.

Mr. Peña Nieto said more private involvement in production, exploration and refining is needed gradually to transform the lumbering giant and only after that could the company be ready to sell shares.

“It’s about making the state and Pemex in particular, efficient,” he said of his energy policies.

“I think first we have to open up [the sector], to make Pemex a bigger company, and then at a later stage, we could head for a stock listing, but later and not initially,” he added, saying a listing could happen during his government or the next.

Mexico, the world’s No. 7 oil producer, awarded its first-ever private operating contracts last August for several onshore mature fields and will award a second round later this year.

More-lucrative contracts in deep water, where there could be upwards of 29 billion barrels of crude equivalent, or 58% of the country’s prospective oil resources, are not expected to materialize until the next administration.

Pemex expects production this year to average around 2.5 million barrels per day (bpd) and after a sharp decline in output at its largest fields needs to ramp up exploration to avoid becoming a net oil importer in the future.

Mexico’s oil production is seen holding steady at around 2.8 million bpd over the next 14 years unless Pemex significantly boosts investment, the Energy Ministry said in a report in late February.