The Repsol Connection

Follow the contracts. In a pair of provacative pieces in the two most recent Saturday editions of the newspaper La Jornada, journalist Jaime Aviles traces the tortured path of Mexico's threatened energy privatization from several years back. Aviles uses as his starting point a November 10, 2003 interview hosted by Jeffrey Davidow at the Institute of the Americas with one Felipe Calderón, a chat sponsored by the Reinhart Foundation (promoter of "projects" in Mexico and Guatemala) and Servicios Integrados de Gas de México ("Mexican Integrated Gas Services" or Igamex, owner of 13 gasoducts in Mexico and whose partners include Fergus Thermes, Corporativo San Ángel and Saks Energy). Calderón, then an obscure, recently-named Secretary of Energy for President Vicente Fox, makes no secret, despite his stumbling English, of his zeal for energy privatization, in order to provide Mexico the investment it needs to grow and create jobs and the usual canned blah blah. What is fascinating about the timing of this interview, however, as Áviles points out, is that just three-and-a-half weeks before it on October 16th, Secretary Calderón had provided the Spanish energy company Repsol with its first contract for the "development, infrastructure and maintenance" of gas fields in the Cuenca de Burgos in the Bloque Reynosa-Monterrey for over $2 billion US dollars. All this is part of the "silent privatization" of Mexico's electricity and gas industry (also supposedly protected by Article 27 of the Constitution) through such mechanisms as the so-called "Contracts for Multiple Services", as this hefty contract for Repsol, in fact, was.

The rest of the story, as Áviles lays it out, goes like this: Calderón quits as Energy Secretary in June of 2004, having made sure in the meanwhile to get a construction project for a regasification plant in the State of Colima underway. Why? To thaw out frozen natural gas arriving from South America by ship. A year and a half later, on December 12, 2005, Repsol makes a surprise announcement; it has signed a contract with the Peruvian government to buy natural gas from them and re-sell it in Mexico.

Mexico, however, has still not announced any intention to buy Peruvian gas or build a regasification plant. It is vitally important, then, that Calderón make it publicly known to Davidow (as he does in the final part of the interview, available on YouTube with the title "Encuentros: Davidow and Calderon November 2003) in order to, in effect, seal the deal (make explicit his intentions) with Repsol before beginning his candidacy for the Presidency.

On October 23, 2005, the PAN nominates Calderón for President. Shortly after, on December 12th, Repsol gives advance notice that it intends to sell Peruvian gas to Mexico. On June 6, 2006, just 26 days before the Presidential election, the Diario Oficial (the official publication of the Mexican government) opens the bidding for the provision of natural gas and the construction of the regasification plant in Manzanillo, on the coast of Colima. President Fox thus gives the green light in code to Repsol, and to anyone else who is paying attention: the election is stacked; come what may, Calderón will safely get in and execute this contract (López Obrador would certainly have not). The bidding is for a 25-year contract, with the meeting for the bidders to make their offer being set for September 25, 2006. That day, Repsol makes its offer, but with a catch: it can only offer gas for 20 years. The very next day, Mexico's Federal Energy Commission magically modifies the terms of the bidding so that the Mexican government contract will only be for 20 years.

Calderón is subsequently installed in office, not without great difficulty, and on September 18th, 2007, the Federal Energy Commission awards the contract to Repsol, but for 15 years, as Peru had in the intervening time modified their own agreement with the Spanish company for a lesser period. Peru will sell the gas to Repsol at Peruvian prices but Mexico, per the terms of the contract (in which only Repsol, of all the companies in the whole world, met the terms and conditions to make an actual bid), will buy it at Texas prices, the highest in the world as they are subject to what is known as the Henry Hub index - the $15 billion dollar cost to Mexico I mentioned in my last post may, consequently, spiral upwards of $21 billion dollars. And here we are today, with Calderón and his very interested Internal Affairs Secretary grasping at any argumental straws available to push the "opening" of Pemex, and the contract between Peru, Mexico, and their costly intermediary Repsol, safely in place, the plants being built, and all is well. Except, of course, for the Mexican consumers of gasoline, natural gas, and electricity.

(The two pieces by Jaime Áviles can be found at: http://www.jornada.unam.mx/2008/03/29/index.php?section=opinion&article=004o1pol and http://www.jornada.unam.mx/2008/04/05/index.php?section=opinion&article=004o1pol.)