November 19, 2010 / 8:57 PM / 9 years ago

Mexico top court may back private oil deals -paper

MEXICO CITY, Nov 19 (Reuters) - Mexico’s Supreme Court is leaning toward upholding regulations that allow state oil monopoly Pemex to contract private companies as operators, Reforma newspaper reported on Friday.

A draft of the court’s proposed decision obtained by the paper rejected a challenge brought by the lower house of Congress to the constitutionality of the regulations.

The ruling still must be approved by the whole court and could be changed.

A court spokeswoman was not immediately available to comment.

Legislation passed by Congress in late 2008 opened the door to Pemex hiring private companies as contractors as a way to reverse Mexico’s slumping oil output.

But the lower house voted in October 2009 to challenge the regulations implementing the law, claiming the government overstepped its authority.

Pemex [PEMX.UL] was expected to approve on Nov. 17 the first three contracts, which would turn over three mature oil fields to private operators. But the board meeting was postponed until Nov. 24 to allow members more time to prepare.

The company hopes private firms will help it modernize production and boost crude output from the older fields by up to 150,000 barrels per day.

Private oil companies have been barred from investing in Mexico for more than seven decades. Many companies see the country as a promising place to gain access to untapped resources. Many Mexicans still oppose foreign participation in the nationalized industry.

Once approved by the board, the auction process for the three contracts is expected to take up to nine months. [ID:nN08224752]

Additional contracts for exploration in the deep waters of the Gulf of Mexico and for production services at the challenging Chicontepec onshore oil field are expected to be offered in subsequent auctions.

The challenge to the constitutionality of the regulations has been cited by some private investors as an obstacle to bidding on the contracts.

Pemex and the Mexican government have said they are confident the court will rule in their favor. (Reporting by Robert Campbell; Editing by David Gregorio)

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