Pemex to Let 51% of Its Oil Unit Go Private : Energy: It will be the state-owned petroleum industry’s first such divestiture.

Mexico is taking steps to sell a majority interest in a small unit of its state-owned oil monopoly in what would be the first divestiture at Petroleos Mexicanos, the company known as Pemex.

The announcement late Monday that the government will take bids on the purchase of a 51% interest in the Pemex subsidiary that sells motor oils and lubricants could be the first step toward placing a larger share of Pemex in private hands.

Ownership in the newly created company will be restricted to Mexicans, with Pemex retaining a 49% stake. Guidelines on the bidding process will be announced next week.

In making plans for the sale, the government acknowledged that the recently restructured oil monopoly is not ready to meet U.S. and Canadian rivals on equal footing under the North American Free Trade Agreement announced this month.

The purpose of the sale, according to Pemex, is “to maximize competitiveness in the face of challenges imposed by the free trade agreement” negotiated with the United States and Canada.

To date, Mexico’s 10-year privatization program has excluded selling any interest in Pemex’s units. However, the oil company’s role in petrochemical production has become more restricted and, increasingly, responsibility for oil exploration has been delegated to private contractors working for Pemex.

Pemex has on rare occasions permitted private investors offering technology to take minority positions in refining units. For example, E. I. Du Pont De Nemours owns a 40% interest in a joint-venture plant with Pemex that produces lead additives for gasoline.

By selling an interest in the small but highly profitable motor oil and lubricants subsidiary of the $19.2-billion-a-year corporation, the government is testing the waters for future, larger divestitures at Pemex, said economist Rogelio Ramirez de la O. If this sale is successful, he expects joint ventures in refining in a year or two.

That would follow the pattern established in the government’s privatization program. Privatization began in 1982 with the sale of small, regional firms, then moved on to the telephone company and banks, which fetched billions of dollars.

Along the way, the definition of industries considered “strategic”--appropriate for government ownership--was narrowed to make airlines, steel mills and food processing plants eligible for privatization.

During that period, the government monopoly on the oil industry went virtually untouched. Oil has been a powerful symbol of sovereignty and nationalism in Mexico since the industry was nationalized in 1938.

Meanwhile, countries such as Venezuela and Russia have opened their oil industry to foreign investment.

Mexico has financial reasons to loosen its grip on oil. It is estimated that Pemex needs an investment of $13 billion or more for exploration and production over the next five years, said Ramirez de la O. That will leave limited resources for refining, an area where tougher environmental standards will require more investment.

In addition, Mexico will need more refineries. Domestic demand is growing, and Pemex has said that it has reached the limits of its capacity.

Previously, Pemex tried to make up for the shortfall in funding refinery projects by borrowing money from clients to finish plants, then repaying the clients with petrochemicals made at the facilities.

“That scheme never worked,” said Ramirez de la O. To obtain the investment needed, it must offer private investors a financial interest in the refineries, he said.

The first joint venture between Pemex and private interests will be responsible for formulating, packaging and distributing oils and lubricants. Pemex will continue to manufacture the products, primarily for sale to its franchised service stations, which are prohibited from selling other brands.