MEXICO CITY (Dow Jones)
President Felipe Calderon's plan to open the downstream oil industry to private investment is meeting stiff resistance, putting a key element of an energy reform proposal at risk.
Mexico hasn't built a new since 1979, and state oil monopoly Petroleos Mexicanos imports 41% of its gasoline, selling it at a loss in the domestic market. The government says it needs to build a new refinery every three years to completely phase out expensive fuel imports by 2021.
Many politicians outside the ruling National Action Party say Pemex should make these investments on its own.
On Monday, Jesus Ortega, who is battling for the leadership of the left-wing Democratic Revolution Party, or PRD, said he is most strongly opposed to private capital in the oil refining, pipeline and storage businesses.
Ortega said he'll present an alternative energy reform proposal to the one submitted last month by Calderon, and that it will focus on capitalizing the state oil firm so it can carry out its own investments. Critics say Pemex doesn't have the project management skills to take on new refinery projects.
Ortega is viewed as the more moderate candidate in the PRD's ongoing leadership struggle. Andres Manuel Lopez Obrador, a former presidential candidate who backs Ortega's competitor for the party leadership, has been railing against the entire energy reform proposal for months. His supporters camped out in congressional chambers for two weeks in April to disrupt debates on the reform bill.
The Institutional Revolutionary Party, or PRI, which ruled Mexico from 1929 to 2000, is also balking at the proposed downstream reforms. On Monday, the Reforma newspaper reported that a leading member of the PRI, Sen. Francisco Labastida, is opposing the refining reforms because they would exclude the oil workers' union, which is politically aligned with the PRI, from the construction of new plants.
Labastida wasn't immediately available for comments.
Calderon denies he is trying to privatize the industry. His proposal would allow outside companies to build refineries and process Mexican oil for a fee. But they couldn't own the oil they process, or sell the gasoline and other refined products.
Oil nationalization runs strong in Mexico, a country that expropriated foreign oil assets back in 1938. According to Alberto Vera of the Parametria polling firm, about half the country thinks Calderon is looking to privatize the oil industry even though he has made an effort to argue the opposite.
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