Congress: Balancing Patrimony and Economic Growth

“We are probably the only country where energy is viewed ideologically,” says Felipe de Jesús Cantú Rodríguez, President of the Congress’ Energy Commission and PAN Congressman. “The view from the people is that Pemex belongs to all Mexicans, and that the oil belongs to Mexico.” As a result, pushing through reforms and gathering consensus on changes in the Mexican energy sector is a challenge for the Mexican legislative branch, and therefore takes time.

The best way to find agreement on a topic is when initiatives come from more than one political party, as it can help to remove ideological or party political concerns from the issue at hand. This is always more dicult during the months preceding an election, but Cantú Rodríguez hopes for a reform in the near future on the transportation of oil and gas, because Mexico’s ageing pipelines need much maintenance. “Some of these pipelines have as many holes as gruyere cheese,” he says. They are being repaired, Cantú Rodríguez explains, but it is still a very weak sector of the oil company. And with the amount of accidents, leaks and explosions that happen as a result of damaged pipelines, he adds that this might be a topic that Congress can agree on.

Cantú Rodríguez believes that less than half of the last reform’s potential is being applied. Before new reforms, he thinks that the 2008 Energy Reform should be fully exploited, especially when it comes to the contracting model. Pemex could achieve everything that it needs right now, without any further regulatory reform, but the NOC is still influenced too much by the old regulatory and legislative system, according to Cantú Rodríguez. He believes the contracts made available by the 2008 reform have the potential to be improved, so they are attractive for investors even in high-risk projects like deepwater exploration. In the last two years, the Energy Commission has supervised the implementation of the 2008 Energy Reform, as well as contributed changes, if needed, to the federal government’s National Energy Strategy. Congressmen on the commission can ask for more data or information, and can also add to legislation in order to address necessary topics.

“In the past, we have asked the executive branch to clarify their statements on energy-related matters. A recent example was asking for them to provide data related to their renewable energy strategy. Previously the strategy had just been expressed as trends to increase the amount of renewable energy infrastructure in the country without any hard figures about how many wind farms or renewable energy plants they were planning to build,” says Cantú Rodríguez. The Commission also meets with Pemex representatives, asking for specific information on projects or financial issues. It is then able to give information to Congress on new initiatives, if asked.

The oil and gas industry is one of the more regular topics discussed in Congress. Last year, Congress introduced a law to make fuel theft a felony. “This discussion was started in the Chamber of Deputies, even though it was approved first by the Senate,” says Cantú Rodríguez. Perpetrators now face up to 18 years in prison. According to Pemex figures, there were 1,324 cases of illegal pipeline tapping registered last year as of December 2011, most of them in pipelines of the Pemex Refinery subsidiary. The fuel taken illegally last year is estimated to amount to 2,986,563 bbl as of November 2011. The states with the most cases were Sinaloa, Veracruz and Tamaulipas.

Congress also debates issues relating to Pemex, particularly the company’s eciency and productivity, often going as far as to discuss specific projects and the challenges they face. Pemex is under constant pressure to increase production and, while the majority of Congress thinks this is necessary, it also believes that pressure partly led Pemex to accelerate production activities in crucial areas such as Chicontepec without being ready yet, just because the presence of hydrocarbons was known, according to Cantú Rodríguez. Another point of discussion is whether to remove Pemex from the federal government’s annual budget. “If we remove the NOC from the budget, Pemex will have better capacity to distribute resources in its investments,” says Cantú Rodríguez. Greater financial independence would help Pemex be more ecient, as it would be able to allocate its budget according to its own plans and not according to what the Finance Ministry allows. However, if this happens, Cantú Rodríguez says that the company must take steps to maintain its transparency and accountability.

In areas where the NOC doesn’t have the required expertise, such as shale gas exploitation, Cantú Rodríguez says that Pemex needs to either create contracts so that other companies can carry out these projects and give Pemex the gas or profit generated, or should allow private companies to exploit these fields under appropriate Pemex supervision. “Pemex would have much faster growth and would generate much more wealth for the country if we would open our eyes and see that this is the alternative,” he says.