Negotiations between the United States and Mexico over natural gas are apparently snagged because the Mexicans have raised their asking price, but the Carter administration yesterday denied reports that the talks had collapsed.
"the negotiations . . . . have been encouraging," said outgoing Energy Secretary James Schlelsinger. "They continued. We are hopeful, though have no certainty, that they will ultimately result in a contract price that is agreeable to both nations."
If an agreement on price is not reached soon, it could mean postponement of an official visit to the United States by Mexican President Jose Lopez Portillo planned for late this month or next. Signing of the agreement to sell the United States about 250 million cubic feet of gas a year is supposed to be the high point of the planned meeting with President Carter.
In a news conference, Schlesinger also reiterated earlier assureaces that there will be ample home heating oil supplies this winter. He also predicted that gasoline prices could decline slightly later in the year, but that some spot shortages could develop next year.
U.S. officials had been optimistically predicting that agreement would be reached at a meeting in Mexico last Friday. That did not happen, however, and there were unconfirmed reports that the Mexicans had upped their demanded price unexpectedly to ore than $4 per thousand cubic feet of gas (mcf).
Currently, U.S. buyers pay about $2.80 per mcf for gas exported by Canada. Two-hundred and fifty billion cubic feet of gas a year is less than 2 percent of U.S. consumption.
Schlesinger said that "the original contract that was signed by six American firms (in 1977) called for a price equal to the Btu equivalent of No. 2 fuel oil in New York Harbor. If that original contract were now in effect, the price would thus be something on the order of $4.40 per thousand cubic feet, about twice as much as we are paying for new gas from our own domestic producers."
Schlesinger was widely criticized for blocking implementation of that contract. He has stressed repeatedly that he believes there will be no market for the gas unless it is priced to complete with residual fuel oil -- a heavy oil used by industry and electric utilities.
The comparability of different fuels is often measured in terms of heat content expressed in British thermal units, or Btus. Currently, the price of natural gas corresponding to the price of residual fuel oil is about $3.75 per mcf, but that does not include the cost of delivery. The price U.S. negotiators were believed to be urging was about $3.50 per mcf.
Schlesinger sarcastically noted that reports that the talks had collapsed originated in California. "Some of the sources seem to be located in the capital city of that state, Sacramento," he said. "I think it has morle to do with the aspirations for the presidency on the part of certain individuals than it has to do with the tone and pace of the negotiations."
California Gov. Edmund G. (Jerry) Brown Jr., who may challenge President Carter next year for the Democratic nomination, visited Mexico this week.
No date has been set for the next negotiating session with the Mexicans, but officials said that no date had been set at any of the three previous meetings prior to that of last Friday.
"further exchanges will occur through diplomatic channels," Schlesinger said, adding, "We expect to have further meetings. I do not see that there has been any extrodinary adjustments in the pace of the netotiations."
On home heating oil, the administration has set a goal of having 230 million to 240 million barrels of distillates, which includes home heating oil, on hand during October.
At current production rates, Schlesinger said, "We will reach the target with a good deal of room to spare."
Stocks of that size would be adequate to meet the needs of a winter 20 percent colder than normal, similar to that of 1976-77, he said.
"he also declared, "There should be no recurrence of gasoline lines, at least not until the onset of the driving season next year." He predicted that gasoline this fall would be plentiful enough that "there will be competition among service stations" that will "begin to drive down retailer margins." In other words, prices might decline.
"there is a prospect that we will have an excess of demand over supply next year," he cautioned, that could result in some "spot shortages" but they would not be nearly as servere as those this year.