By Dave Graham and Ana Isabel Martinez
MEXICO CITY Dec 6 Mexican senators on Friday
neared agreement on a bill that would allow private investors to
drill for oil and market the country's black gold, but keep
ownership of the crude in state hands.
The draft bill breaks with 75 years of tradition in Mexico,
where the 1938 expropriation of foreign oil companies helped to
forge its modern self-image, and President Enrique Pena Nieto
aims to pass his most ambitious reform before Christmas.
But mindful of the resistance it faces on the left against
opening up the oil industry, the government has sought to tread
carefully, stressing that it will not put ownership of the
country's oil wealth in private hands.
A deal hinges on talks between Pena Nieto's Institutional
Revolutionary Party (PRI) and the conservative National Action
Party (PAN), which had espoused a more radical vision of reform
for the oil industry, including offering concessions to private
operators, a line the PRI will not cross.
Jorge Lavalle, a senior PAN energy expert in the Senate,
said the two sides were close to an agreement on what kind of
contracts can be offered, including production-sharing deals and
licenses that could give companies much more freedom.
But he said Mexico would remain the owner of the oil.
"They won't be able to book reserves of hydrocarbons coming
from Mexico because hydrocarbons are and will remain property of
the nation," Lavalle told Reuters.
Lavalle said production-sharing contracts could allow
companies to be paid with oil instead of cash, but a senior PRI
lawmaker, speaking on condition of anonymity, said this was not
on the cards because it implies handing over the crude to
When unveiled by Pena Nieto in August, the proposal aimed to
offer only profit-sharing contracts to private investors, but
the PAN and elements of the PRI argued this would not be
sufficient to attract major investment to the industry.
"We are not going to tie ourselves to one model," said
Francisco Dominguez, a PAN senator who sits on the energy
committee in the upper chamber of Congress.
"The PAN proposed concessions, but that creates a lot of
noise. Licenses are exactly the same, and that's what they use
in different places like Brazil and Norway," he added.
Instead, the revised draft will give companies scope to
operate across the industry, in the hope the shake-up will
reverse nearly a decade of declining production, lawmakers said.
IRONING OUT DIFFERENCES
The reform would allow private companies to form
partnerships with state oil monopoly Pemex, which was
created after the 1938 expropriation.
PRI lawmakers said the bill was likely to allow private
companies to market the oil, but stressed that the commodity
would still remain under the ownership of Mexico.
The reform, one of a series of measures Pena Nieto has
unveiled to ramp up growth in Latin America's no. 2 economy,
aims to change the constitution to make new types of contracts
For that, the government needs to secure two-thirds of the
votes in Congress, but the PRI does not even have a simple
majority and needs PAN support to pass the bill.
PRI Senators had aimed to present the draft bill early on
Friday but the plan was delayed until the weekend to give time
for the two sides to hammer out a consensus.
The party has been at loggerheads with the PAN over details
of the reform, such as how to manage a planned sovereign wealth
fund to be created from oil revenues.
While the PRI wants to make sure the Finance Ministry
oversees the fund, the PAN wants an autonomous body.
Outside the Senate in downtown Mexico City, hundreds of
federal police stood guard as scattered groups of protesters
held speeches against the energy bill in front of a huge cordon
of metal barricades erected to protect the building.
Graffiti, posters and banners plastered on the barricades
denounced the energy bill as a national betrayal, invoking
symbols of the left and heroes of Mexico's pre-Hispanic past.
One spray-painted image depicted a grinning Pena Nieto, his
trousers around his ankles and the words "Pemex is not for sale"
written across his bare buttocks.
"Private companies aren't going to want to share their
winnings with Mexico," said small business owner David Pacheco,
51. "The capital always ends up taking flight."
Crude output at Pemex has fallen by a quarter since peaking
at 3.4 million barrels per day in 2004, and its management says
it needs a huge injection of capital.
However, many Mexicans believe the plan is a covert bid to
sell off the company, which despite a string of corruption
scandals over the years has remained a potent national symbol.
Franco Quadros, 61, said he would camp outside the Senate
all night to protest. The bill could lead to the kind of
privatization that helped make Carlos Slim the world's richest
man after he bought state phone monopoly Telmex two decades ago,
Officials said senators should unveil the draft bill at the
weekend and that they still hope to pass it as soon as next