Pemex plans U.S. subsidiary

Mexico’s state-owned oil company says it will form a new entity to explore and produce shale gas and deepwater oil in U.S. territory.

The plan will help Petroleos Mexicanos, known as Pemex, acquire drilling techniques it now lacks for complicated terrain in Mexico, Chief Executive Officer Emilio Lozoya said in an interview with The Wall Street Journal.

“The geology is similar and we can benefit from numerous areas of collaboration with international oil companies,” Lozoya said.

Pemex confirmed the plan Monday — even as dueling plans for revamping the state-owned oil company are being put forth by rival political parties.

Pemex has so far been unable to exploit its deep-water reserves and shale formations, and the Mexican constitution limits its ability to hire outside expertise in Mexico. The government has proposed allowing Pemex to enter profit-sharing contracts with private companies and let outside companies refine and transport oil inside the country while a rival party opposes the move.

Allowing private companies to drill in Mexico’s portion of the deepwater Gulf and inland in shale formations would be “huge” for Louisiana’s oilfield service companies that have the technology and expertise to do the job, an official of the Louisiana Oil and Gas Association said last week when the plan was proposed.

Private company participation would require politically controversial changes to the constitution, which says that Mexico’s oil belongs to the state.

Mexico’s largest leftist party is leading opposition to opening up Pemex to more private investment as a way to reverse its declining production.

On Monday, the Democratic Revolution Party, or PRD, presented its own plan to fix the ailing, outdated oil company without constitutional changes or a greater role for private companies.

Instead, the PRD is proposing to loosen the government’s stranglehold over revenues from Pemex, where 70 percent of profits go to fund the federal budget.

Party founder and former presidential candidate Cuauhtemoc Cardenas also said Pemex should be made more independent by removing Cabinet secretaries and the oil workers union from the Pemex board seats they now hold.

Cardenas is the son of the late President Lazaro Cardenas, who nationalized the oil industry in 1938.

Mexico’s oil production has dropped by about one-quarter over the past decade.