U.S. Energy Chief Promotes Bush Plan in Mexico

In his first official foreign visit, U.S. Energy Secretary Spencer Abraham on Thursday met with top Mexican government officials here to promote President Bush’s vision of a “hemispheric energy policy.”

Abraham’s visit was short on concrete measures, but it signaled the importance of Mexico to the United States’ evolving energy strategy and helped build on the new administration’s relations with its southern neighbor. Abraham also acknowledged that California’s electricity crisis has prompted new thinking on energy reform, enhancing Mexico’s potential role all the more.

“President Bush recognizes not only the need for an increased supply of energy, but the critical role the hemisphere will play in his administration’s energy policy,” Abraham told the Hemispheric Energy Conference, an annual meeting of energy ministers from 34 nations. “He has . . . given me a clear mandate: to work--in the first instance--with our neighbors to meet our energy objectives.”

Although the Bush administration has expressed interest in a more open Mexican energy market, Abraham took great pains to stress that the United States will not meddle in Mexico’s internal affairs.

The Mexican constitution requires that natural resources such as oil and gas remain under domestic control, and the issue is politically loaded: Since Mexico expelled foreign oil companies more than six decades ago, the prospect of foreign involvement has become synonymous with commercial imperialism.

But Mexico’s energy sector is in desperate need of investment--as much as $30 billion by some estimates--and President Vicente Fox has said it will have to come from abroad. He has made energy reform a national priority and legislation is pending to further open the electricity sector to foreign competition.

Foreign investment in electricity generation is currently allowed for private use or for sale to the Mexican power grid. But reform would create a competitive electricity market where foreign players could sell directly to Mexican consumers.

Efforts to reform the oil and gas sectors, however, would require a constitutional amendment, which is still politically unlikely, said Roger Diwan, managing director of markets and countries for Washington-based Petroleum Finance Co. Fox has backpedaled on an early suggestion to privatize the state-owned oil monopoly, Petroleos Mexicanos, or Pemex. Still, he has vowed to “liberalize” portions of the monopoly.

As a first step, Fox named four of Mexico’s wealthiest private businessmen to the Pemex board--previously comprised only of government and union officials loyal to the Institutional Revolutionary Party, the former ruling party. That decision has caused an uproar among PRI legislators, who have called for removal of the board members.

Abraham gingerly signaled his support for such reforms, acknowledging that the United States’ own efforts at energy deregulation have been less than perfect.

“Obviously, each nation must decide what is the most appropriate way for it to encourage private investment, based on their own history and legal structures,” he said. “But it is clear that unless we all confront this challenge . . . we cannot hope to stimulate the kind of production that will be needed to meet tomorrow’s demand for energy.”

Abraham also announced that the U.S. Energy Department will issue a permit authorizing a new electricity transmission line between Brownsville, Texas, and Matamoros, Mexico. And said the two governments are moving to consider further expanding power transmissions across their borders.