Pemex: SOS, SOS, SOS…

Mexico President Felipe Calderon submitted his plan to Congress hoping to overhaul the country's oil sector.

Mr. Calderon counts on bringing foreign oil majors back to Mexico's oil field since they were kicked out in 1938. The bill seeks to allow full private ownership of oil refineries, something that until now has been the exclusive domain of monopoly Petroleos Mexicanos, or Pemex.

But Mr. Calderon backed away from any attempt to alter Mexico's constitution and allow Pemex to form joint ventures with other oil firms - a common industry practice that pools the costs and risks of finding new deposits. Instead, the reform would give Pemex an enhanced ability to hire companies through service contracts and pay them fees, rather than allowing the companies to have part ownership of the reserves they find.

Mexico, which relies on oil to pay more than a third of the government's bills, was the third-biggest oil supplier to the U.S. last year. Its decline in oil exports will force the U.S. to become even more dependent on the Middle East for crude.

Even Mr. Calderon's attempt to open the downstream sector to private investment may falter. Mexico already imports 41% of its gasoline, and the energy ministry says it needs at least three new refineries by 2020. But a Mexican refinery will be a hard sell. An outside firm would have to buy its crude from Pemex and sell the gasoline and diesel to the domestic market, where fuel prices are set by the government through Pemex.