By Simon Gardner and Dave Graham
MEXICO CITY Dec 5 Mexican senators will present a bill to open up Mexico's energy sector on Friday, and opposition conservatives are weighing a compromise on demands for lucrative concessions to clinch a deal with the ruling party, a top lawmaker said on Thursday.
Opening up the state-run energy sector is a cornerstone of President Enrique Pena Nieto's economic reform drive and he argues that more private investment is needed to lift flagging oil output in Latin America's No. 2 economy.
Senators from Mexico's conservative National Action Party (PAN) and ruling Institutional Revolutionary Party (PRI) are hammering out the wording of the energy revamp, which the president hopes will boost growth.
While Pena Nieto has proposed profit-sharing contracts, the PAN has long been pushing for more lucrative concessions. The leftist Party of the Democratic Revolution (PRD) is against opening up the sector to private companies.
PAN Senator Jose Rosas Aispuro, Senate vice president, said the word "concession" could stoke fears of privatization and that his party was now looking at licenses.
"We are not wed to the word (concession)," Aispuro told Reuters in a telephone interview. "We talked earlier about the possibility of concessions, but they can be partnership contracts or licenses, that's what we're negotiating."
"We feel the word concession is a more aggressive term and society could think it means something closer to privatization, which is not at all the idea," he added. "Licenses are a kind of permit the state gives out, and the state retains the power to cancel that kind of contract at any time."
Enrique Burgos, a PRI Senator who chairs the committee overseeing constitutional issues, said the reform would encompass elements from all the parties' proposals before committees begin to debate it.
"I expect it to include the different options," he told Reuters.
Mexico's energy sector is dominated by state oil monopoly Pemex and desperately needs private investors to help exploit the country's oil reserves. Mexico's crude output has fallen by a quarter since peaking at 3.4 million barrels per day in 2004.
Aispuro said opting for licenses would "help the PRI and the PAN to find a middle ground" and still go far enough to give investors legal certainty.
Oil companies have voiced interest in being able to book oil reserves, which they wouldn't be able to do under the profit-sharing contracts that Pena Nieto proposed in August.
But Mexico's oil industry, which was nationalized in 1938, is a source of national pride and any reform appearing to grant full-blown concessions would further stoke Mexico's left.
The PRD broke off talks with the PRI and PAN on the energy reform last week, which is expected to push Pena Nieto's party to embrace a more market-friendly bill in order to win support from the conservative opposition.
Lawmakers suspended a meeting set for Thursday to present the reform, and rescheduled it for Friday.
"It is not that there are no agreements," PRI Senator David Penchyna, leader of the Senate's energy committee, told reporters. "The agreement will be constructed by the united committees."
Police erected metal barriers around the Senate on Wednesday and several hundred protesters demonstrated before lines of troops in riot gear on Thursday. Some demonstrators knocked down barriers, but the protests have been largely peaceful.
Penchyna said the committee members would begin debating the bill on Sunday, and the pace of those negotiations would determine when the bill would be ready for a vote by the full Senate.
Approval by the committees would clear the way for a vote by the full Senate as early as next week, he added.
Mexico's lower house on Thursday gave general approval to an electoral reform the PAN has demanded as a condition for its support in pushing through the energy bill.
Long the dominant force in Mexican politics, the PRI lacks a majority in Congress and needs PAN support to pass the energy bill.