UPDATE 1-Mexico warns of energy crisis without overhaul

(Recasts, adds detail and background)

MEXICO CITY, May 8 (Reuters) - Mexico's will suffer a severe energy crisis before 2018 unless the oil sector is overhauled, Mexican Energy Minister Georgina Kessel warned on Thursday.

President Felipe Calderon unveiled a proposal last month to let private companies participate more in the energy industry to stave off falling oil production.

But the plan has met stiff opposition from leftists, who say the government wants to hand over state oil monopoly Pemex to investors. Mexicans are passionately protective of Pemex, which finances a third of government spending but lacks funds for exploration.

"If we don't do anything, Mexico will face a severe energy crisis before the next presidential administration ends (in 2018)," Kessel told lawmakers.

After leftist lawmakers held sit-ins in Congress to protest the proposal, the government agreed to hold more than two months of debate about the future of the oil sector.

Aimed at shoring up flagging output and reserves in the world's No. 6 oil producer, Calderon's proposal would let Pemex sweeten oil field service contracts with private companies using performance-based bonuses.

Critics say that would violate a ban on private companies exploring for and producing oil in Mexico. (Reporting by Jason Lange; Editing by Marguerita Choy)