Mexico oil watchdog wants to boost powers by overseeing contracts

Thu Jul 5, 2012 10:21pm EDT
 
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By David Alire Garcia

MEXICO CITY (Reuters) - Mexico's oil industry watchdog on Thursday said its role should be expanded to oversee private development contracts awarded by state oil monopoly Pemex to smaller energy companies, ramping up its previous calls for greater reform in the sector.

The National Hydrocarbons Commission, which regulates production and exploration projects in the world's No. 7 oil producer, has argued since its creation three years ago that it needs more reach to help boost the competitiveness of Pemex.

The development contracts are part of a scheme introduced in 2008 to increase investment in the energy sector after Pemex lost nearly a quarter of its production due to the rapid aging of its largest oil fields.

Mexico, which relies heavily on oil revenues to fund the federal budget, risks becoming a net importer in the next decade if it fails to replace lost output with new discoveries.

Commission president Juan Carlos Zepeda told Reuters in an interview that there is not enough oversight to ensure contractors are meeting their obligations for production targets and safety.

"(Pemex) cannot be a partner and a supervisor at the same time," Zepeda said. "You have a conflict of interest."

He added that the Commission's role should be expanded to oversee the contract bidding process and to supervise private contractors' performance after the fields are awarded.

Since last year, Pemex PEMX.UL has awarded two rounds of private contracts for mature oil fields, inviting companies to help increase output in areas that are in decline.   Continued...