Mexican Congress approves energy reforms

Mexico’s Congress has passed historic constitutional reforms opening the energy industry, including oil and gas, to private investment (OGJ Online, Oct. 14, 2013).

The reforms build on amendments proposed Aug. 12 by President Enrique Pena Nieto, who proposed changes to the country’s strict limits on foreign energy investment but left details to Congress.

The Senate on Dec. 11 passed a reform bill opening the industry to competition and specifying that participation terms available to Congress for oil and gas production and development will include licenses, production-sharing, profit-sharing, and service contracts. It left open the possibility for other types of contracts.

The Senate bill also stipulated that the board of Petroleos Mexicanos, the state oil monopoly, include five independent members and five representatives of the federal government, including the secretary of energy, who can cast decisive votes in ties. The legislation removed representatives of the Pemex union from the board.

The lower house of Congress passed the Senate version of the reform bill without change. The legislation must be approved by a majority of state legislatures. The law firm Mayer Brown said the approval “is expected soon.”

In a Dec. 13 report, Michael Cohen of Barclays Research said, “Approval of this landmark legislation could insert the missing piece of the North American energy landscape” and have “dramatic medium and long-term implications given the US’s tight oil and Canadian oil sands.”

But development likely will be slow, requiring investment at more than twice the current rate by Pemex, about $24 billion/year, Cohen said.

He said slight near-term increases from current production of 2.5 million b/d are possible but called government targets of 3 million b/d by 2018 and 3.5 million b/d by 2025 “ambitious.”