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  • Jul 26, 2014
  • Updated: 9:59am
NewsWorld
MEXICO

Reforms set to bring foreign oil firms back to Mexico

PUBLISHED : Wednesday, 14 August, 2013, 12:00am
UPDATED : Wednesday, 14 August, 2013, 3:23am

Mexican President Enrique Pena Nieto has proposed sweeping reforms of the country's oil sector that would allow foreign energy firms back into the industry 75 years after being thrown out.

Pena Nieto on Monday proposed a constitutional reform that would allow state oil monopoly Pemex to partner with private energy companies in oil and gas exploration and production.

The joint deals would tap foreign oil company capital and technology to revive oil and gas production, which has sagged under Pemex in recent years.

But the giant Pemex - Petroleos Mexicanos, which has dominated the industry since the 1938 nationalisation - would maintain the state's ownership of all hydrocarbon resources.

And Pemex itself, a key source of government revenues and a crucial driver of the economy, would remain in state hands.

The reform would modify Article 27 of Mexico's constitution to allow private companies to form joint ventures with Pemex in energy exploration and production, according to a summary of the proposal.

Article 28 would be changed to allow Pemex to join with private firms in refining, petrochemicals and storage.

Pena Nieto stressed "oil and other hydrocarbons will continue to be the exclusive assets of the nation", and Pemex would remain "100 per cent owned by the nation".

The reforms are aimed at restructuring the tax regime that has hurt Pemex's competitiveness. The company was established in 1938 when Mexico took over foreign oil company operations, and is responsible today for about one-third of state income.

Pena Nieto said the government would take a long-term position on getting income from the oil sector rather than a short-term approach of collecting taxes. He predicted oil production could grow from 2.5 million barrels a day last year to 3 million in 2018 and 3.5 million by 2025.

He could face significant opposition. The three leading political parties have agreed that Pemex needs to be reformed to encourage more investment and production in the sector.

But leftist politicians oppose constitutional amendments and have planned protests against what they consider the privatisation of publicly owned resources.

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