Power prayer.

Fernando Canales Clarion has been director of Mexico's Energy Secretariat since September, a job he took on upon leaving as Secretary of Economy, a position he had held since January 2003. A descendent of a family of businessmen, Canales instead has leaned more toward politics. He is a grandson of the founders of steel aluminum and plastics giant Grupo IMSA, where he was assistant general manager and vice president. He also sat on various boards of directors in the United States and in Latin America. His political life began in 1978, when he joined Mexican President Vicente Fox's National Action Party, after which he hem several public offices. Canales spoke with LATIN TRADE Mexico Correspondent Marisol Rueda about the country's energy future.

As President Fox's term nears its end, energy reform--one of his campaign promises--has not been achieved. The fundamental part of the energy reform has not been achieved; however, the six-year [presidential] term is not over yet, nor is the term of the current legislature. We expect that in the coming months legislators will be convinced of the need to update the legal and Constitutional framework that regulates energy activity in our country. We must convince ourselves of the need to add private resources to energy production, under the strict supervision of the government and with strict application of Mexican law. Nevertheless, we have achieved important advances: a new fiscal structure for Pemex; the possibility of generating electric power through Pemex by converting every bit of its industrial output into electricity; and the approval of a renewable-resources energy law.

What do you think about Venezuelan President Hugo Chavez's energy initiatives?

We defend the sovereignty and the decisions of all the countries in the world, so whatever Venezuela or any other country does, given that it does not affect Mexican interests and rights, they are free to do it. That two or more countries share resources or projects should not be criticized. Mexico is doing the same thing. This past December, a summit among Central American nations was held, including the Dominican Republic, with the goal of establishing an energy-integration program.

Some experts say that oil will hit US$200 a barrel within two years, and that a reduction in the oil supply would lead to a worldwide economic depression.

Major parts of these forecasts are mistaken. Projections we have from Mexican oil experts [on the order of $60 a barrel] do not suggest an increase of that size. Facing the price increases we saw last year, production has increased, which has the effect of balancing the demand and keeping prices steady. In terms of Mexico, we are sure that our consumers will not be left without an adequate supply.

Production at Cantarell, the oil field that contributes more than 60% of Mexico's oil output, is declining. What measures are being taken to offset the loss?

Exploration and drilling is intensifying. In the southeastern area of the country, where Cantarell is, there is a lot of increased drilling in different fields. If this rate of investment continues under our program, by 2010 we will reach a 100% rate of reposition [a new well will be in operation for each one that has run dry].

What is Mexico's position regarding the project to create an energy ring for natural-gas distribution in South America?

That it is something positive. We do not have enough production of this product; we are buying gas from abroad. In January, the construction of a regasification plant, to import liquid natural gas, was announced in Manzanillo. Potential suppliers are Peru and Bolivia, and nations such as Australia and Malaysia. We encourage the construction of these types of facilities, which will allow our neighbors in South America greater development than they have seen in recent years.

How much gas does Mexico import yearly?

A third of what we need. We are importing from the United States, which is not the ideal country to supply us with natural gas for various reasons:The United States is not a self-sufficient country, it imports large quantities of gas from Canada and, in addition, because of its economic characteristics, it has the highest prices in the world. That's why we want to increase domestic production and import natural gas from other countries.

It seems key that Mexico not have to import so much gas.

The ideal scenario is exactly that. Importing gas is option two; option one is to increase domestic production. We have been working at increasing domestic production, and in 2005 imports were less than in 2004.