UPDATE 2-Mexico minister says oil reform could boost GDP

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MEXICO CITY, April 18 (Reuters) - A government proposal to overhaul Mexico's state-controlled energy sector could boost economic growth by close to 1 percent if approved, Energy Minister Georgina Kessel said on Friday.

Kessel said the conservative government's oil industry reform plan -- which is being held up by leftists in Congress and protested against in the street -- would create jobs and infrastructure in Mexico.

"Achieving the strengthening of the oil industry would generate benefits for the country ... and an increase in the rate of growth of our gross domestic product which could reach close to 1 percent," Kessel told a business conference.

Left-wing lawmakers have blocked Congress for the past week in a show of opposition to President Felipe Calderon's oil reform plan, which would let state oil monopoly Pemex sweeten oil field service contracts with bonus fees.

Kessel did not give a time-frame for the boost to economic growth from new projects the oil reform could spur, such as the building of new refineries. If the ruling conservatives can get the bill passed, it would go into effect next year.

Pemex says it needs the reform to attract partners to help it reach crucial deepwater oil deposits, but leftists say using bonus fees to procure exploration alliances violates barriers in the Constitution to private firms drilling for Mexican oil.

Mexico is the world's No. 6 producer of oil and a top U.S. supplier, according to the U.S. Energy Information Administration, but production is falling at a major oil fields and Pemex has been unable to find new reserves fast enough to stave off the decline.

Kessel called on lawmakers "to sit down and discuss the reform", although the ruling National Action Party, or PAN, has admitted it is resigned to not getting the bill approved before the current congressional session winds up on April 30.

"It is important that we take decisions as quickly as possible. Mexico is losing out on opportunities, we are losing out on revenue," Kessel said.

Leftist lawmakers, some wearing uniforms of the state oil company, seized podiums in the upper and lower houses of Congress a week ago, forcing legislators to session in side rooms for the first time in two decades. (Reporting by Michael O'Boyle; Editing by Leslie Adler)