Breaking News Bar
updated: 12/7/2013 5:52 PM

Senate proposal: Open Mexico oil to private firms

hello
Success - Article sent! close
  • A protester sits under an umbrella Saturday in front of riot police outside the Mexican Senate building in Mexico City.

      A protester sits under an umbrella Saturday in front of riot police outside the Mexican Senate building in Mexico City.
    Associated Press

 
Associated Press

MEXICO CITY -- A Mexico senate committee on Saturday proposed the most dramatic oil reform in decades that would open the country's beleaguered, state-run sector to private companies and investment.

The Senate proposal would allow the government to grant contracts and licenses for exploration and extraction of oil and gas to multinational giants such as Exxon or Chevron, something that is currently prohibited under Mexico's constitution.

Order Reprint Print Article
 
Interested in reusing this article?
Custom reprints are a powerful and strategic way to share your article with customers, employees and prospects.
The YGS Group provides digital and printed reprint services for Daily Herald. Complete the form to the right and a reprint consultant will contact you to discuss how you can reuse this article.
Need more information about reprints? Visit our Reprints Section for more details.

Contact information ( * required )

Success - request sent close

It also says that contracts could be made directly with the state, rather than issued by the state-run oil company, Petroleos Mexicanos, or Pemex, ending its monopoly on Mexican oil.

The proposal, which gets official committee consideration on Sunday, could allow contracts for profit- and production-sharing, as well as licenses, in which companies pay royalties and taxes to the Mexican government for the right to explore and drill. Pemex would get first consideration for licenses.

It would give private companies the ability to post expected benefits in their financial statements, as long as they specify in their contracts that all oil and gas they find in the ground belongs to Mexico, according to articles expanding on the reform.

The constitution would continue to prohibit oil concessions, considered the most liberal kind of access by private oil companies. The bill still must be approved by the two houses of Congress and 17 of Mexico's 31 states and federal district.

Opponents said the proposal outlines a system that has been proven a "total failure," while analysts consider it an unprecedented move in opening the door to the private investment Mexico needs to save its oil sector. Mexican oil production has been declining despite increased investment, and Pemex has not had the wherewithal to date to exploit the country's vast deep-water or shale oil and gas reserves.

"This is a big breakthrough," said George Baker, publisher of the Houston-based newsletter, Mexico Energy Intelligence. "This is a very big intellectual and policy leap ... Whether or not it's ultimately commercially attractive can't be decided at this point."

The leftist opposition Democratic Revolution Party, or PRD, renewed its call for a public referendum on the issue.

"They're trying to give the industry to foreigners," said Sen. Dolores Padierna. "The participation of private oil companies has been, if you look at it calmly, a total failure."

The measures in the Senate proposal have been prohibited in the decades since 1938, when then-President Lazaro Cardenas nationalized the oil industry, a symbol that for decades that has been fiercely protected by the constitution from possible profiteering by foreign companies.

The proposal goes much further than the plan introduced by President Enrique Pena Nieto in August, which only allowed profit-sharing agreements. It would change three articles of constitution, while Pena Nieto had only proposed to change two.

It was hashed out by Pena Nieto's ruling Institutional Revolutionary Party, or PRI, with the conservative opposition, the National Action Party, which wants an oil reform as open as possible to investment and partnership possibilities.

The PRI has been more moderate, given the leftist opposition that has drawn thousands in street protests.

But the mobilization so far hasn't been as great as in 2008, when former presidential candidate Andres Manuel Lopez Obrador all but killed the congressional attempt to open the oil industry to greater private investment. Lopez Obrador was sidelined by a heart attack last week, but protesters have still shown up every day since Wednesday to oppose the oil reform.

While oil production has increased substantially in the U.S. and Canada, Mexico's has fallen 25 percent since 2004, and proven reserves are down 41 percent since 2001, the Mexican Institute on Competitiveness says.

Share this page
Comments ()
Guidelines: Keep it civil and on topic; no profanity, vulgarity, slurs or personal attacks. People who harass others or joke about tragedies will be blocked. If a comment violates these standards or our terms of service, click the X in the upper right corner of the comment box. To find our more, read our FAQ.
    help here