Mexico’s senate passes oil, gas reform legislation

Mexico’s senate approved legislation on Aug. 6 that will begin to open the country’s oil and gas industry to outside investment for the first time since it was nationalized in 1937. The measure headed for President Enrique Pena Nieto’s desk, where it was expected to be signed.

“Today we took a big step toward the future for Mexicans,” Pena Nieto said via his Twitter account. “We will take better and more sustainable advantage of our energy resources.”

The legislation effectively will end the monopoly national oil company Petroleos Mexicanos (Pemex) has held in the country. It will introduce competition in exploration and production with bidding rounds for blocks, and permits for midstream and downstream operations, according to Gabriel Hernandez-Garcia, Pemex’s general director and chief executive.

“We expect to have more players participate in Mexico’s energy industries,” he said July 14 during a presentation at the US Energy Information Administration’s 2014 annual conference in Washington.

Pemex also will transform itself to a state-owned productive company focused on value creation instead of social goals; more realistic remuneration, contracts, and budgets; the ability to be a partner with other companies; and a steady move toward being more competitive globally, Hernandez-Garcia said.

“Pemex’s role clearly has changed,” he said. “It needs to compete for acreage in an open environment. We’ll face major challenges to compete, make decisions, retain talent, and follow stricter regulations.”

Mexico’s oil and gas reforms could be “the next big thing” for E&P worldwide, he suggested. “Pemex is going to have the same name, but operate differently,” Hernandez-Garcia said. “Major surgery was necessary, but we still have significant production and resource potential.”

Contact Nick Snow at [email protected].