Mexican state oil monopoly Petroleos Mexicanos is drafting plans for a new refinery to help curb expensive gasoline imports, according to officials and company presentations.

With refining capacity strained throughout the world, the new plant would lessen Pemex's import bill and free up imported products like gasoline and jet fuel for other markets.

Mexico, like many oil producers from Ecuador to Iran, exports crude but imports refined products due to a lack of refineries. Many analysts say a global deficit in refining capacity has contributed to record high oil prices, as higher gasoline prices push up crude prices.

A presentation published on Pemex's web site lists tentative plans to build a new refinery to process 300,000 to 600,000 barrels a day of heavy crude oil. It would cost at least $7.3 billion to construct, and significantly expand the country's 1.6 million barrel-a-day refining capacity.

Pemex plans to present the project to Congress before the end of next June, a deadline set out in the country's budget plan. Pemex is drafting the refinery plan according to current legal guidelines, which forces Pemex to hold a 100% equity stake.

The Congress, where members of the Senate energy committee are discussing energy reforms, could change the scope of the project if it allows Pemex more flexibility.

"The (refinery) plan depends on the reforms," said Pemex chief executive Jesus Reyes Heroles.

However, he said Pemex isn't banking on the reforms going through, and is assuming 100% Pemex ownership as it drafts the project, which would take around five years to build.

Lawmakers recognize the need to reduce gasoline imports, but aren't promising and radical changes.

"We are not going to make any changes to the constitution," said Francisco Labastida Ochoa, the president of the energy committee and member of the Institutional Revolutionary Party, or PRI, the largest opposition party.

Former leftist presidential candidate Andres Manuel Lopez Obrador says Pemex needs to boost gasoline output. But he says the money must come from cutting bureaucracy costs, not from outsiders.

Bear Stearns, an investment bank, says Congress could open up the downstream industry to private investment by changing bylaws, not the constitution itself.

"By eliminating these bylaws by simple majority, private capital would be allowed to participate in downstream activities," said Bear Stearns in a November research report on Pemex.

When asked about this possibility, the PRI's Labastida said more meetings with other parties will be necessary before considering such an option.

Bear Stearns noted that Mexican gasoline imports have risen 67% over the past seven years. Pemex currently imports 38% of its gasoline, mainly from the U.S., and sells it in Mexico at subsidized prices.

It is unclear if this financial burden will be enough to open a highly politicized industry to private capital. Pemex has held a monopoly on oil production and refining since the 1938 nationalization, and most Mexicans view state ownership as a source of national pride.

The company only has nine years left of proven oil reserves, and needs to act fast to secure new supplies. Allowing outside investment in refining would free up more cash for Pemex to invest in exploration, said Bear Stearns.

Copyright (c) 2007 Dow Jones & Company, Inc.