Petroleos Mexicanos, the shareholder doubling its stake in Spanish oil company Repsol YPF SA (REP), wants to jointly drill in deep waters though media reports say Repsol is resisting the growing power Mexico’s state-owned company. A joint deep-water project is “an alternative that we haven’t discussed with Repsol, but could be a win-win for Repsol and us,” Juan Jose Suarez Coppel, chief executive officer of the company known as Pemex, said yesterday in Mexico City. Pemex has sought such foreign projects to get knowledge and technology applicable to Mexico, he said. While Pemex on Aug. 29 agreed with Sacyr Vallehermoso SA, the largest shareholder in Repsol, to boost its stake and vote in a bloc to revamp management, Repsol Chairman Antonio Brufau has asked Spain’s government to block the accord, El Mundo reported today. The Pemex-Sacyr agreement would alter the power balance in Madrid-based Repsol, Spain’s largest oil company, which has a market value of 24.4 billion euros ($34.8 billion) and represents 7.8 percent of the weighting in the country’s IBEX 35 benchmark stock index, according to Bloomberg data. Sacyr needs Repsol’s dividends to make interest payments on the 4.9 billion euros it owes to a syndicate of banks for funding the share acquisition in 2006. The loan comes due Dec. 21 this year, unless an extension is made. Cinco Dias today reported that Sacyr didn’t activate an “automatic” one-year extension to the loan by a July 31 deadline and is holding talks with banks, citing unidentified people in the financial industry. A Sacyr spokeswoman declined to comment. Direct Competitor The Aug. 29 accord calls for Pemex to increase its Repsol stake to 9.8 percent within a month. The Mexico City-based oil company will finance 70 percent of the acquisition with debt and doesn’t plan further purchases, Suarez Coppel said. Sacyr, a Spanish construction company, will maintain its 20 percent stake, under the accord. Pemex and Sacyr want to split Repsol’s chairmanship from the chief executive officer role, also held by Brufau, and to increase their board representation. Brufau and Repsol plan to challenge Pemex’s plan, saying that the Mexican oil company is a direct competitor and it creates a conflict of interest, Madrid-based El Pais newspaper reported yesterday. A Repsol spokesman in Madrid declined to comment today. Suarez Coppel said there are no conflicts of interest or personal disputes behind the accord with Sacyr. “This transaction is to bring more transparency” to the administration of Repsol, Suarez Coppel said. “This operation is not about a specific project, not about dividends.” Capital Expenditures Pemex completed financing for the purchase yesterday, he said. The purchase won’t affect the state oil company’s capital expenditures, Suarez Coppel told reporters. A company press official who declined to be named because of corporate policy said Pemex as of today has acquired the rights for the remaining shares to increase its stake. Repsol gained 8.8 percent in the first three days after the accord and today fell 2.7 percent to 20.02 euros a share as of 12:32 p.m. in Madrid. To contact the reporters on this story: Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net; Juan Pablo Spinetto in Rio De Janeiro at jspinetto@bloomberg.net To contact the editor responsible for this story: Jessica Brice at jbrice1@bloomberg.net

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