Mexico Unveils Energy Reform That Would Draw In Private Sector

by
Reuters
Mexican President Enrique Pena Nieto on Monday proposed a sweeping energy reform that would amend the constitution to offer private companies lucrative profit-sharing contracts, seeking to lure investment to stem sliding oil output.

Enrique Pena Nieto

Mexican President Enrique Pena Nieto on Monday proposed a sweeping energy reform that would amend the constitution to offer private companies lucrative profit-sharing contracts, seeking to lure investment to stem sliding oil output.

The proposal calls for changes to key articles of the constitution that ban certain contracts and make oil and gas exploitation the sole preserve of the state.

If enacted, the reform would mark the largest private sector opening in decades for Mexico's oil and gas sector, which was nationalized in 1938. The government will send its proposals to Congress this week.

The centrist government's bill stops short of proposing concessions to tap Mexican oil, viewed as the best-case scenario by oil companies. It treads a fine line between the demands of leftist and conservative lawmakers on an emotive issue that overshadows Pena Nieto's wider reform agenda.

The energy overhaul is the cornerstone of a wide-reaching reform package that he hopes will boost growth in Mexico, Latin America's No. 2 economy, and lift its energy industry into the modern era, but it is politically divisive.

Oil companies like BP and Exxon Mobil are awaiting details of the language of the proposed constitutional changes - and that of ensuing so-called secondary laws that include the fine print of how to implement the bill - to gauge how far-reaching, and therefore lucrative, the reform will be.

Breaking up the 75-year-old state energy monopoly Pemex could double foreign investment in Mexico and improve growth, potentially providing the biggest leg-up to its economy since the North American Free Trade Agreement two decades ago.