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Pemex CEO: Great energy potential in Mexico

By Nick Parker, CNN
updated 7:18 AM EDT, Wed August 14, 2013

(CNN) -- At just 39 years old, Emilio Lozoya has arguably one of the most challenging jobs in Mexico.

The former private equity chief has a staff of 160,000 at the notoriously bureaucratic oil monopoly Pemex. He took the top job last December and is now operating in a politically charged climate of upheaval for the country's energy sector.

He seems to be enjoying the experience.

This week, President Enrique Pena Nieto proposed ending the 75-year old state monopoly on oil to allow private investment -- in a bid to boost Pemex's dwindling reserves.

Watch more: Mexico proposes oil industry reforms

"The way we foresee it is: For the first time the private sector shares the risks with Pemex," Lozoya tells CNN.

"How does it work today? Pemex has only service contracts which means I will hire for hundreds of thousands of dollars an oil platform and I have to pay them regardless whether they find oil or not. And I believe there are better ways of doing business on behalf of the state."

Read more: Natural gas rig burns in Gulf of Mexico

The plan would see constitutional amendments create profit sharing contracts with private oil companies. Potential partners like Exxon Mobil could bring expertise in areas such as drilling in the deep waters of the Gulf of Mexico, where there are an estimated 29 billion barrels of oil.

But crucially, the state would remain the owner of all reserves, something the global "supermajors" may not like. Putting proven reserves on company balance sheets is an important practice.

"They will be able to book the economic interests, but not the subsoil because the subsoil will continue to belong to the nation," says Lozoya.

So they could book what the oil is worth but not actually the oil itself, I ask.

"What the oil is worth when it is extracted. Correct."

As the son of a former Energy Minister, Lozoya has grown up with the sensitivity that surrounds Pemex. Since the appropriation of foreign-held reserves in 1938, the company has been synonymous with national pride and self-reliance.

Any move against the monopoly would always create sections of strong opposition: Street protests are planned in September and tough congressional battles lie ahead.

"I am confident the political forces in Mexico will maybe even enhance what the President has put forward in Congress and we do expect a passage in the coming months," he says.

"Mexico has great potential in the energy landscape. But the reality is that today we are importing a third of the gas we consume. And we have enormous gas reserves. This is an oxymoron. We have to make sure we convert oil and gas into jobs and technology. And this reform allows us to do so."

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