INTERVIEW-Mexico's Pemex says weighing Repsol ties after energy reform

Tracy Rucinski and Carlos Ruano
Thursday, 19 Dec 2013 | 6:01 PM ET

* Pemex says still time to fix ailing alliance with Repsol

* Says Mexico energy reform opens door for foreign alliances

* Says would like Repsol to remain a strategic ally

* Seeks partners with deep water and shale expertise

MADRID, Dec 19 (Reuters) - The long-time oil alliance between Mexico's Pemex and Spain's Repsol <REP.MC is reaching a crossroads as the Mexican state-run firm seeks to take advantage of a historic energy reform in its home country to expand its foreign presence, a director said.

The relationship between the two companies started to fray two years ago after a failed attempt to oust Repsol's chairman, Antonio Brufau, and reached a climax last month when Pemex , which holds a 9.4 percent stake in Repsol, voted against the Spanish firm's management.

But Arturo Henriquez, Pemex's representative on the board, said in an interview with Reuters that there was still time to repair the partnership and even take it forward by seizing jointly new opportunities in oil-rich Mexico and beyond.

Mexico voted last week to open its oil and gas sector to foreign investors for the first time in 75 years as part of a sweeping energy reform.

"The energy reform is a major milestone for Pemex," said Henriquez, who is also chairman and chief executive of Houston-based subsidiary Pemex Procurement International Inc. (PPI).

"We have to assess the investments we have on the table in light of such a dramatic game changer for the company. ... We want to evaluate whether Repsol is an ally for this new era. If so, excellent. We'll have to boost (the partnership) and if not, we'll have to take a decision."

He said the Mexican company has made a priority of seeking juicier returns from its 25-year investment in Repsol.

Pemex played an active role in striking a multi-billion-dollar deal to compensate Repsol for the nationalization of its former Argentine subsidiary YPF, although the boardroom drama that followed threatened last month to fracture further the strategic accord between the two.

While some analysts speculated Pemex could even sell its stake in the Spanish oil major, Henriquez said Repsol, with specialized deepwater technology, could be an ideal partner to explore Mexico's undeveloped resources given the long relationship and the cultural ties between the two companies.

Mexico has Latin America's third-largest proven crude reserves after Venezuela and Brazil with more than 10 billion barrels, and it also has nearly 30 billion barrels of prospective resources in its territorial deep waters of the Gulf of Mexico.

Henriquez stressed, however, that any partner would not only have to offer technology but also help the company expand in new markets. These could include the United States, Europe or Asia.

"What we want from any alliance, whether with Repsol, Exxon or Chevron is help in developing expertise, technology, capital ... mainly in deep water and shale oil and gas," he said.

Both Chevron and Exxon Mobil Corp have expressed broad support for Mexico's reforms, though final investment decisions will likely depend on how new rules are implemented.

Another potential partner could be Royal Dutch Shell , with which Pemex has a profitable 50-50 refinery tie-up in Texas, the sixth-largest in the United States.

"We're in a privileged position, in fashion as the latest country to open up its energy sector. Right now everyone wants to come to Mexico," said Henriquez.

(Additional reporting by Reuters Breaking Views columnist Fiona Maharg Bravo in Madrid and David Alire Garcia in Mexico City; Editing by Julien Toyer and Leslie Adler)

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