Monday, September 8, 2008

Message from President Felipe Calderón as Part of the Second State of the Union Address

Energy and PEMEX

Good evening.

Since the first day of my mandate, we have undertaken actions to radically transform Mexico and build the nation we want for ourselves and our children.

That is why government is reinforcing the national energy sector with major investments.

In electric infrastructure alone, investment for this year has exceeded $55 billion pesos.

These resources have been used to build major works such as the Combined Cycle Power Station in Tamazuncale, and complete the El Cajón Reservoir, the largest works of their kind worldwide.

Work is also underway on the Hydroelectric Power Station at La Yesca, on the borders of Nayarit and Jalisco.

At the same time, in order to promote the production and replenishment of our oil and gas reserves, this year government is investing a further $180 billion pesos.

However, we know that we must redouble efforts and invest far more resources to guarantee that Mexico will have sufficient energy to be able to grow and finance its development over the next few decades.

For this reason, on April 8 I submitted a reform bill to Congress to reinforce Petróleos Mexicanos (PEMEX). This initiative is based on the acknowledgement of the fact that Mexico is losing ground with regards to oil production.

At today’s rate of oil production, Mexico’s proven reserves will only suffice for another nine years of production. We must change this situation.

Oil production has also declined by over 500,000 barrels a day compared to what we produced four years ago.

What does this mean?

It means we are no longer obtaining $150 billion pesos a year simply from oil revenue. It is absurd that in an oil-producing country, four out of every 10 liters of gasoline we use in our cars should have to be purchased abroad because of the lack of sufficient refining capacity.

While our neighbors are already beginning to explore and drill for oil in the deposits under our common border, Mexicans have been unable to explore, far less begin to exploit, this major source of wealth and we could even lose some of it.

We must act fast; fortunately we have the potential to change this situation.

The good news is that we have major inland, coastal and offshore oil and gas deposits, and if we manage to drill for and produce petrol we could obviously guarantee Mexico's development.

The reform seeks to strengthen rather than privatize Petróleos Mexicanos. It is a reform that guarantees that this firm will belong to Mexicans alone.

And what it seeks is to multiply investment, access to state-of-the-art technology, and PEMEX’s operating capacity, in order to explore new deposits and produce more petrol, gas and gasoline for everyone's benefit.

Over the past four years Mexico has only been able to embark on six exploration projects in the deep waters of the Gulf of Mexico, without achieving positive results.

With the reform, PEMEX would be able to develop hundreds of projects simultaneously in just one year, as many other countries and virtually all the world’s oil companies do. This would rapidly increase oil and gas production and we could make up for the fall in production we have had over recent years.

The proposal also includes new mechanisms of transparency and accountability for PEMEX; in order to guarantee better results and put an end to corruption.

If the reform is approved, for the first time ever Mexicans, who are PEMEX's true owners, would be able to acquire citizens' bonds that would pay similar dividends to the firm's profits and enable us to receive clear, transparent information on its performance.

The reform to strengthen PEMEX is vital to Mexico’s future.

The initiative I submitted to Congress has been widely debated at forums organized by the Senate, and it has been reviewed by virtually all the specialists in the area.

Several parties and political forces have also submitted their own proposals.

We all agree on the urgent need to take measures to transform Petróleos Mexicanos into the modern firm it should be.

I know that legislators from various parties are also working hard to analyze these projects.

I would urge them to discuss and, if possible, approve a reform that would strengthen PEMEX so that Mexico could once again occupy its rightful place as one of the world's leading oil producers.

Let us act here and now to make the best use of the country's oil wealth, increasing our production and reserves in order to obtain the revenue that will drive Mexico's well-being and progress for many years.

By strengthening PEMEX we will strengthen Mexico.

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Presidency of the Republic, September 1, 2008, Mexico City

Translation Presidency of the Republic