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  HOME | Oil & Minerals (Click here for more)

Lula Urges Mexico, Brazil to Form Oil Partnership

ACAPULCO, Mexico – Mexico and Brazil should form a strategic partnership in the oil sector, according to former Brazilian President Luiz Inacio Lula da Silva, who urged oil monopoly Petroleos Mexicanos and Petrobras to work together to ensure further growth and technological development.

“I dreamed that one day Petrobras and Pemex ... might unite, perhaps to create another company to explore other markets around the world,” Lula said Friday at the close of the two-day Mexican Banking Association’s 74th annual conference.

He said this potential alliance should be discussed by the two governments with an eye to exploring for oil “in other regions around the world with more competitive markets and to becoming more competitive, more profitable and larger Latin American companies.”

“I hope that’s possible,” said Lula, who gave a speech at the conference titled “Global Challenges for Resolving the Global Financial Crisis: Brazil’s Experience.”

Lula recalled that Petrobras ceased to be a monopoly in 1997 and became a mixed company with 38 percent of its capital controlled by the state and the rest in private hands.

He recalled that the energy giant raised $70 billion last year in the biggest share sale in history and now is a powerful company whose market capitalization has climbed from $5 billion to $215 billion.

Lula noted that Petrobras is a modern company that has its own research center and makes use of cutting-edge deep-water drilling technology, adding that that is “not the result of luck, but of investment.”

Although Petrobras is a mixed-capital company, the government participates in the company’s decisions and makes sure the country’s strategic interests take precedence, Lula said.

While Petrobras in considered a world leader in deep-water drilling and has made massive ultra-deep finds in the Atlantic Ocean in recent years, Pemex’s output has stagnated due to aging fields and a lack of major new discoveries.

An energy overhaul in 2008 gives Pemex – nationalized in 1938 – more freedom to undertake projects with private firms, which are to be hired under incentive-based service contracts.

But the legislation excludes the provisions of President Felipe Calderon’s original initiative that would have allowed those companies a stake in the oil or any eventual profits.

Lula, a former Marxist who governed as a centrist from 2003 until the end of his term in Jan. 1, 2011, also noted that after no new refineries were constructed for 30 years Petrobras currently is building five.

He also said the company has become a self-sufficient natural gas producer and is working to develop alternative fuels.

Lula said the government must play an important role in the economy and cannot be afraid of private initiative, but instead but establish clear rules of the game for all sectors.

He called on Mexican bankers to arrange business meetings with Brazilian executives to form strategic alliances that lead to the creation of “strong and competitive” new companies.

After comparing the size of the both countries’ economies and bilateral trade flows, the former president said there is “something wrong in (bilateral) relations.”

Lula said it is disappointing that total bilateral trade amounts to just $7 billion annually and challenged the two countries to adopt a more daring trade policy.

He also urged Mexico, which is heavily reliant on trade with the United States, to look more to strengthening relations with South American nations.

Regarding the global financial crisis, Lula said it is still not over and that it is necessary for world leaders to remain vigilant.

He also said the G-20 group of major economies must take measures to prevent banks from falling into financial problems, strengthen government oversight and bar financial entities from lending money they don’t have.
 

 

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