December 6, 2013 / 2:42 PM / in 4 years

UPDATE 3-Mexico near energy reform deal but presentation delayed

By Dave Graham and Adriana Barrera

MEXICO CITY, Dec 6 (Reuters) - Mexican senators on Friday were near agreement on offering private companies lucrative contracts to drill for oil, but the draft constitutional reform’s presentation was delayed to allow details to be hammered out.

Officials said Senate committees could unveil the reform at the weekend and start debating one of the cornerstones of President Enrique Pena Nieto’s economic reform drive on Monday.

State monopoly Pemex dominates Mexico’s oil industry, which was nationalized in 1938. The government wants to attract private investment to revitalize crude output, down 25 percent from its peak in 2004. But any full-blown concessions to private companies would draw fierce opposition from many in Mexico, where the oil industry is a source of national pride.

The ruling Institutional Revolutionary Party (PRI) has been at loggerheads with the conservative National Action Party (PAN) on details of the reform, with the PAN pushing for contractual schemes including licenses and the production-sharing contracts favored by oil companies.

Lawmakers, speaking on condition of anonymity, told Reuters the meeting could be moved to the weekend.

PAN Senator Francisco Dominguez, who sits on the Senate’s energy committee, said the PRI and PAN were very close to agreement on the kinds of contracts that could be offered, including licenses that could give more control to oil companies over production.

“We are going to do a combination ... We are keeping it open,” Dominguez told Reuters in a telephone interview. “Why tie our hands, when it depends on how production is going, how the economy is doing, what the oil price is.”

“There are various combinations. We are not going to tie ourselves to one model,” he added. “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.”

Ownership of the oil would remain in state hands, as the government has insisted.

Dominguez said there would be no reform document ready to send to the committees until Saturday evening at the earliest.

An aide for a PRI senator also said discussions were leaning toward license-style contracts, and said lawmakers were also discussing to what extent national industry would be favored by the reform, as the PAN demands.

A senior PRI lawmaker who asked not to be named said negotiations aimed to create space for companies to participate across the chain of production and commercialization. It would also allow companies to book the monetary value of reserves without legally owning them.

“We’re working on what the proper scheme for contracts would be,” the aide said on condition of anonymity, given sensitivity over the discussions. “Being as flexible as possible on the contracting side, without going all the way to concessions.”

In July, the PAN proposed a constitutional reform that would allow more lucrative concessions but a month later President Enrique Pena Nieto proposed more limited profit-sharing contracts.

The leftist Party of the Democratic Revolution (PRD) opposes opening the sector to private companies, and last week pulled out of talks over the reform. Many observers expect this decision to push Pena Nieto’s party toward a more market-oriented bill to win support from the conservative opposition.

Pena Nieto says the overhaul is needed to lure more private investment to lift flagging oil output in Latin America’s No. 2 economy.

Enrique Burgos, a PRI senator who leads the committee overseeing constitutional issues, said on Thursday 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 said.

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.

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