Mexico's energy future hinges on elections

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MEXICO CITY (AP) -- In the midst of Mexico's biggest oil boom since the 1970s, the nation's top two presidential candidates are debating whether to turn outward and open oil to private investors -- or inward by exporting less crude and giving Mexicans subsidized gasoline.

The question involves nationalist pride as well as pump prices, but the real challenge lies elsewhere: finding new deposits to replace Mexico's rapidly declining Cantarell field off the Gulf Coast. If Mexico doesn't act quickly, the question of what to do with the oil wealth may be moot -- in a decade, there may not be enough oil left to supply the economy.

The best hope for new discoveries appears to be in deep-water exploration in the Gulf of Mexico, but the state-owned Petroleos Mexicanos, or Pemex, oil company has little experience in such projects. Mexican law has long prohibited private investment in anything other than minor subcontracts, too small to interest most major energy companies.

Conservative Felipe Calderon, President Vicente Fox's former energy minister, and the third major candidate, Roberto Madrazo, propose loosening the rules and allowing private companies to explore deep waters through joint ventures with Pemex.

Leftist Andres Manuel Lopez Obrador, who is running about even with Mr. Calderon in the polls, opposes private investment and isn't very interested in deep-water exploration. One of his advisers, Rogelio Ramirez, calls it "beyond our reach" and prefers onshore projects.

Mr. Lopez Obrador thinks that too much emphasis has been placed on exports and wants to focus instead on channeling more of the windfall oil profits into building new refineries and petrochemical plants in Mexico.

Mr. Lopez Obrador, a native of the oil-rich Gulf Coast state of Tabasco, also vows to make the energy sector "the pillar for promoting industrialization and development," a phrase that recalls the oil-boom rhetoric of the 1970s.

Back then, Mexicans benefited from the nation's oil riches, albeit largely in the form of splashy, ill-conceived government projects and government jobs.

This time around, the windfall is being more conservatively managed, and Mexicans are seeing the fruits of historically high oil prices only indirectly, in the form of low interest rates fueled by the government's booming foreign currency reserves.

"In the old days, the money was spent in a different way," said political analyst Federico Estevez. "In a sense, the less you see of it, the better ... the less money they [officials] have to spend on white elephants."