Mexico’s Oil Monopoly Begins Auction of Plants

Mexico’s state-owned oil monopoly Pemex on Tuesday officially commenced the public auction of a huge complex of petrochemical plants on the Gulf of Mexico, the first phase of a privatization designed to raise more than $1 billion.

The announcement comes amid protests by Pemex workers fearing layoffs and complaints by environmentalists that the government has relaxed pollution safeguards to make it easier to sell the seven plants in Cosoleacaque near Veracruz.

Mexico announced in 1992 that it would privatize some 60 petrochemical plants. But the timing, amid the country’s economic crisis, has made it controversial because of the appearance that the country is dismantling its national patrimony to satisfy foreign debts.

Pemex General Director Adrian Lajous Vargas said at a news conference that proceeds from the sale of the plants would be reinvested in Pemex oil and natural gas exploration and production and that no “massive layoffs” would result from the sale.

While critics warn the auction is the first step in the dismantling of the Pemex monopoly, Vargas reiterated that Pemex has no intention of selling “strategic” oil and natural gas properties.

The complex to be sold produces 2.5 million tons per year of petrochemicals, including 86% of Mexico’s ammonia, and generated revenue of $403 million last year. Ammonia is used in fertilizer and in the manufacture of other petrochemicals such as adhesives and plastics.

Employees at Cosoleacaque total 2,488, most of them unionized. And leaders of Pemex worker unions aren’t buying government promises of minimal layoffs once the complex is sold. Workers have held numerous demonstrations in recent weeks to protest the planned sale.

“We cannot have confidence in those promises,” said Victor Manuel Garcia, spokesman for the Pemex Workers Union. “The sale of the plant may be legal but it’s morally reprehensible and wrong for the country.

A winning bid will be announced in April with transfer of the property to take place next August.

Vargas declined to say how much the sale of the plant may fetch. But the complex is the centerpiece of a grid of plants being sold that some officials estimated could bring $1 billion. Pemex would retain a 20% interest in the facilities for five years.

Foreign and Mexican companies are expected to bid on the facilities, whose value may lie more in the access they will provide to the Mexican market than in the physical assets, which need upgrading.

Several leading U.S. players in the ammonia business including Arcadian Corp. of Memphis, Tenn., and Terra Industries of Sioux City, Iowa, have expressed interest in the properties but cautioned it would depend on the condition of the facilities.