Mexico's conservatives propose 'deep' energy reform, concessions

Reuters News
Posted: Jul 18, 2013 8:46 PM

MEXICO CITY (Reuters) - Leaders of Mexico's opposition conservatives unveiled an outline for a market-friendly energy reform on Thursday, saying it would lure billions of dollars in private investment to the country's struggling oil and gas sector.

The plan put forward by leaders of the National Action Party, or PAN, aims to amend several articles of Mexico's constitution, a long-standing roadblock to permitting private concessions or joint ventures with multinational oil companies.

President Enrique Pena Nieto of the centrist Institutional Revolutionary Party, or PRI, has also promised a sweeping energy reform, but details are not expected until September.

The PAN's proposal follows the presentation of a separate energy reform plan by the leftist Party of the Democratic Revolution, increasing pressure on Pena Nieto to show his hand.

"Our oil industry model has run dry," PAN party chairman Gustavo Madero told reporters. "It is an unsustainable, non-viable model that needs to be thoroughly reformed in order to return to productivity."

Madero said turning around Mexico's flagging oil and gas production would be achieved "by means of concessions," and the party's plan would allow Pemex to operate more like a private company with managerial and budget autonomy.

Mexican oil production has fallen to 2.5 million barrels per day from a peak of 3.4 million bpd in 2004.

Mexico's current legal framework gives Pemex exclusive rights to explore, produce, refine and commercialize the country's oil and its derivatives.

Pemex is allowed to contract out to third-parties for a wide variety of oilfield services, but payment for services rendered as a percentage of production or profits is strictly prohibited.

PAN congressman Ricardo Anaya described the plan as a "deep reform" that would spur greater competition. Such an opening, he said, would lead to as much as $30 billion in annual private investment and at least 100,000 new jobs each year.

Anaya stressed that the party's plan would keep oil and gas resources under state ownership.

Mexico, the world's seventh largest crude producer, has jealously guarded its oil since nationalizing the industry in 1938, and any plan that gives foreigners any ownership of the crude would meet strong opposition from leftists and traditionalists in Congress.

The PAN's plan would put the national hydrocarbons commission in charge of awarding concessions, and create a new, independent Mexican Petroleum Fund charged with administering oil profits.

It would also amend Articles 25, 27 and 28 of Mexico's constitution. The PAN did not say what changes would be made.

The party's specific bill is expected by July 31.

(Reporting by David Alire Garcia and Adriana Barrera; Editing by Dave Graham and Mohammad Zargham)