Mexico's Fox pushes $7.5-bil Central American energy plan

Mexico City (Platts)--7Nov2005

Mexican President Vicente Fox is pushing ahead with a $7.5-bil plan for
energy development in Central America that includes a large refinery, 
liquefied natural gas plant, a gas pipeline and a major hydroelectric 
project.

     The idea was first mooted during a recent visit to Mexico by the
Panamanian president, Martin Torrijos, but Fox put flesh on the proposal at
the weekend in fringe meetings with Central American leaders and Colombian
President Alvaro Uribe at the Summit of the Americas in Mar del Plata,
Argentina.

     Notably absent from the meetings was President Hugo Chavez of Venezuela,
accused by the US of using oil as a political weapon. Yet part of Fox's
project depends on a broadening of the San Jose accord under which Mexico and
Venezuela supply oil to Central American and Caribbean countries on 
preferential terms.

     At the Mar del Plata summit, Fox, Uribe and most of the Central American
leaders sided with Bush against Chavez and other South American leaders who
denounced US plans to form a Free Trade Area ofthe Americas as "economic
imperialism."

     Fox, Uribe and the Central Americans set up a ministerial commission
to study the technical feasibility of the energy project ahead of an
early-December meeting of regional leaders in Cancun, Mexico, that
will take a firm decision.

     As portrayed by Fox and his foreign secretary, Luis Ernesto Derbez,
the project would involve:

     -- A refinery with capacity to process 250,000-400,000 b/d of Mexico's
heavy Maya crude, to be built in Costa Rica, Panama or Guatemala. The
gasoline produced by the refinery would be retailed throughout Central America
by state Pemex in an extension of the franchise system that it operates in
Mexico.

     -- An LNG regasification plant. Neither the possible capacity nor
potential location has been specified.

     -- A pipeline to carry gas from Salina Cruz on Mexico's southern Pacific
Coast to Guatemala and eventually Panama, where Colombia would also inject gas
into the system. The gas would come from LNG to be delivered to Mexico's
Pacific Coast, where there are plans for at least one regasification plant --
at Manzanillo -- and possibly another, at Lazaro Cardenas. Derbez said likely
suppliers of the LNG would be Peru and Bolivia, though contacts had also been
established with Malaysia and Indonesia.

     -- A "major" hydroelectric plant at some point on the Central American
isthmus. 

     Depending on the size of the refinery, Derbez said that its output would
be divided roughly equally between Central America and Pemex, as a substitute
for the 150,000-200,000 b/d of gasoline that Mexico currently buys on the
world market. In practical terms, it would be similar to the Pemex joint
venture with Shell in its Deer Park refinery, near Houston.

     Supposing the cost of the refinery came to $3.5-bil, Derbez said that
$2.5-bil would be raised in loans backed by institutions such as the World
Bank and the Inter-American Development Bank and by countries that have shown
interest in the development of Central America. Feelers had already been put
out, he said, to the US, Canada, Spain and Britain.

     Pemex would contribute about $300-mil to $400-mil of capital and the
Central American governments a total of $100-mil. The remaining $500-mil or
so would be sought from the private sector. Companies from Central America and
Mexico would be given the first opportunities of investing, and the soft
credits generated by the San Jose Accord would be directed to the project.

					--Ron Buchanan;newsdesk@platts.com

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