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MEXICO
Perdido Fold Belt Area. Therefore and with the execution of joint venture schemes, hydrocarbon resources located in deep- waters can be developed and exploited. This presents great challenges and high risks that Mexico needs to face.
Lessons learned from cases in Argentina, Brazil and Colombia What is the path that Mexico needs to follow? In the Latin American oil industry, the study of the following cases should be done by the Mexican Government, in order to learn the mistakes and the successes related with the application of two different point of views over: privatisation vs mixed capital companies. Learning the strengths and the weakness of these models would provide Mexico with the knowledge that can be applied in order to restructure the oil industry and more specifically the manner and performance of Pemex in the ex- ecution of the upstream, midstream and downstream activi- ties.
The Argentine case: Renationalisation of REPSOL-YPF President Cristina Fernandez de Kirchner announced on April
Another example to be considered is the one related to the principles that
rules the consideration that shall have to be paid by Pemex to its suppliers and contractors. In this regard, article 6 of the Regulatory Law, clearly states the following:
“Petróleos Mexicanos and its subsidiary entities shall be able to enter into
works and services provision agreements with individuals and entities re- quired by the best performance of their activities. The remunerations estab- lished in those agreements shall always be in cash and under no circumstance shall grant ownership on the hydrocarbons for the services rendered and the works executed, nor shall shared production agreements or any agreement whatsoever be entered into which involve percentages in the production or the value of the sales of hydrocarbons or its byproducts, nor in the profits of the contracting entity.”
Therefore, for contractors and suppliers, the consideration principles are
not attractive for large international oil companies; due to the fact that such principles are not internationally competitive, even when the 2008 Energy Reform created the figure of incentive contracts in the exploration field. However for Foreign Service Companies that provide services to Pemex and/or its subsidiary entities, the current procurement regime applicable to Pemex can be considered attractive
The second topic is related to the tax regime applicable to Pemex. Ac-
cording to information provided by the Ministry of Finance and Public Credit, Pemex accounts for about 40% of Mexico’s public-sector revenue through taxes and dividends and petroleum and derivatives account for about 15% of the country’s total exports (net of ‘maquila’ imports). There- fore, for the Mexican Government, Pemex constitutes a principal source of tax revenues and export receipts and as a funding vehicle is a strong eco- nomic incentive for Mexico to support the issuer during periods of financial distress.
Likewise, this second topic should be analysed in the light of a tax reform
that our country needs to implement in order to increase Mexico revenues derived from tax sources. It is of great concern that 10% of Mexico’s GDP derives from the collection of tax contributions. Thus if a Tax Reform is not approved by our Legislative Branch, Pemex will be destined to remain as the major funding vehicle of Mexican Government.
The third topic is the issue of government interference in prejudice of
Pemex and its capacity for making appropriate capital expenditures and the legal prohibition to enter into joint venture agreements with International Oil Companies, in which it shall be stated the possibility for private players to work together with Pemex in oil major projects, like: Gulf of Mexico Deepwaters and the Transboundary Hydrocarbon Resources located in the
16 2012, a bill with the aim to re-nationalize Yacimientos Petrolíferos Fis- cales (YPF). With this bill, the state would purchase a 51% share with the national government controlling 51% of the share package and the provin- cial governments receiving the remaining 49%. But what are the main rea- sons for the Argentina Government to promote a re-nationalisation of REPSOL-YPF? According to media press and governmental bulletins, the main reasons were the following:
(i) An imbalance of approximately $3 billion, in the international energy
trade in 2011; (ii) investment in exploration had been far below those in most of other
Repsol subsidiaries in the world; and (iii) a lack of understanding between the Argentine Government and
Repsol, resulting in mutual accusations from both parties. In this regard, Repsol blamed the decline in exploration and production on government controls on exports and prospecting lease awards and price controls on do- mestic oil and gas.
Therefore, for many oil specialists, the Argentina case shall have to be
studied together with the existence of the following facts that led the failure of the privatisation of Argentina Oil Industry: existence of political risks and government intervention. For many specialists, such facts have discour- aged foreign investment in oil production in Latin America in general.
The Brazilian case: Petrobras as a semi-public company Oil in Brazil is owned by Petrobras, even though since 1997 it ceased to be the country’s legal monopolist, as Pemex is today in Mexico, this company controls significant oil assets in continents like Africa, North and South America, Europe and even Asia and as of 2012 its total assets were $137.3 billion. Due to a sale of $118.3 billion in 2008 Petrobras is considered Latin America’s largest company and the 8th largest company in the world. The company is considered semi-public, because 54% of it is directly owned by the Brazilian Government and has voting rights over the company, Brazils Fundo Soberano controls 5% and the Brazilian Development Bank another 5% so the government’s complete ownership extends to 64% and the rest of the shares are sold in the Brazilian stock market – BM&F Bovespa.
Therefore, the major success of Petrobras and the Brazilian model is that
it is opposite to the entire privatisation suffered by YPF, specifically i) its presence in other countries other than Brazil; ii) its development of techno- logical capabilities applicable to deep water projects; and iii) the reinvest- ment of its profits in new exploration projects. For the fiscal year 2013, Petrobras expects to reinvest 33% of its total profits gained during 2012.
ENERGY & INFRASTRUCTURE | LATIN AMERICA 2013 61
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