Mexico approves historic energy bill
Dec. 12, 2013 at 11 p.m.
MEXICO CITY (AP) - Mexico's Congress voted Thursday to open the country's moribund state-run oil industry to foreign and domestic investors, casting aside nationalist opposition to approve the most dramatic energy reform in seven decades.
The 353-134 vote will allow the government to give private companies contracts and licenses to explore and drill for oil and gas, deals now prohibited under Mexico's constitution.
The state-run oil company, Petroleos Mexicanos, or Pemex, has had a monopoly since the government took over operations of foreign oil companies in 1938, a move that has been revered ever since as a symbol of national sovereignty.
Opponents say they fear that multinationals, especially from the U.S., will once again regain the sort of domination they had over Mexico's oil before 1938. Mexico remains one of the top five crude exporters to the U.S., shipping more than 1 million barrels a day.
But most oil analysts had a positive view of the bill hashed out by President Enrique Pena Nieto's Institutional Revolutionary Party and the conservative National Action Party.
They say major change is needed to rescue Mexico's oil industry, where production has declined and Pemex hasn't had the finances or expertise needed to tap the country's vast deep-water and shale reserves.
While oil output has been rising in the U.S. and Canada, Mexico's production has fallen 25 percent since 2004 despite increased investment.
According to Pemex data, the company has nearly 14 billion barrels in proven reserves and up to 115 billion barrels in prospective reserves, about half of which are in deep water or shale oil and gas.
"The opening of Mexico's markets to put it bluntly, we believe is very good for the people of Mexico and the people everywhere in the world that uses energy," William Colton, Exxon Mobil's vice president of corporate strategic planning, said in a webcast before the vote Thursday.
Supporters say a better energy sector could add at least a full percentage point to Mexico's annual growth rate, which was scaled back dramatically this year from a projected 3.5 percent to 1.3 percent.
"We are going to be able to develop services and competencies in dealing with energy that are transferrable from one country to another," Thomas Donohue, president of the U.S. Chamber of Commerce, told The Associated Press.
The measure would allow contracts for profit- and production-sharing as well as licenses under which companies would pay royalties and taxes to the Mexican government for the right to explore and drill.
Private companies could post reserves as long as they specify in contracts that all oil and gas belongs to Mexico.