December 11, 2013 / 6:58 PM / 4 years ago

Mexico Senate passes energy bill; leftists seek to derail

MEXICO CITY (Reuters) - Mexico’s Senate on Wednesday approved an energy reform to permit the biggest oil industry opening in 75 years, sending it to the lower house where leftists padlocked doors to the chamber to stop lawmakers from debating the bill.

The reform in the world’s No. 10 oil producer, backed by the ruling Institutional Revolutionary Party, or PRI, and the opposition conservative National Action Party (PAN), was sent to the lower house for debate and final approval.

The government aims to pass the bill this week, but after it arrived in the lower house, leftists occupied the speaker’s podium and piled up chairs to block access routes to the chamber and sealed other doors with chains and padlocks.

“Traitors!” screamed a banner unfurled by leftists from the podium when congressional leaders moved the planned session to an auditorium elsewhere in the building.

The stalling tactics by leftists are unlikely to do more than cause a slight delay in approving the bill, which passed the Senate with more than two thirds of the lawmakers’ votes.

The overhaul is designed to entice private oil companies to either operate independently in Mexico, or partner with state oil giant Pemex through production- and profit-sharing, service contracts and licenses.

Pemex’s crude production has fallen by a quarter since hitting a peak of 3.4 million barrels per day in 2004, and export volumes have dropped by a third over the same period.

The upper chamber approved the bill in a general vote late on Tuesday with 95 Senators in favor and 28 against, before voting down reservations raised by mostly leftist opponents of the plan on Wednesday in a marathon overnight session.

A senior PRI lawmaker in the lower house told Reuters that the plan was to pass the bill in committees on Thursday and for the full house to give its final approval on Friday.

As the Senate gave the bill the green light, senators from the leftist Party of the Democratic Revolution (PRD), which is fighting to stop the bill, shouted “Ask the people”. PRI and PAN senators replied by punching the air to cries of “Mexico.”

“We have a good reform for Mexico,” David Penchyna, a PRI lawmaker who heads the Senate energy committee, told Reuters after the vote. “Let us imagine a more productive country, with more competition, more transparency and less corruption.”

Outside the Senate, which is cordoned off with metal barriers, a few demonstrators had railed against PRI senators who were projected onto a screen defending the bill .

One hand-penned white poster taped to the barricades accused lawmakers of selling out the country and likened the bill to the Spanish conquest of Mexico in the 16th century.

“The Spanish came to steal the yellow gold for trinkets. The gringos are coming for the black gold ... Are you going to stay silent?” it read.


Lawmakers made some amendments to the draft bill on Tuesday, adding a paragraph that removes union members from the board of Pemex, a demand of the PAN, which argues that the union is a weight around the company’s neck and breeds corruption.

Carlos Romero Deschamps (L), senator and leader of the oil workers union of state oil monopoly Pemex, speaks with other senators before a debate on an energy reform bill at the Senate in Mexico City December 10, 2013. REUTERS/Henry Romero

When the revised bill was presented last Saturday, the content was a positive surprise for many in the oil industry. The government hopes it will power economic growth in Mexico, supporting the credit rating and the peso. The currency hit a 7-week high on Monday, but has since eased.

The reform is a cornerstone of an agenda that President Enrique Pena Nieto hopes will boost growth in Latin America’s No. 2 economy, which for years has lagged regional peers.

It would allow private companies to operate the country’s oil fields, which were nationalized in 1938. While it stops short of full-blown concessions, it goes much further than many analysts had expected.

Lawmakers say companies will not have rights to book oil reserves on their balance sheets but will be able to report projected benefits from agreed contracts for accounting purposes, which lawyers say is tantamount to the same thing.

Other specialists say the proposal is vague on this point.

In a section setting out how risk-sharing contracts work internationally, the draft bill explains that production-sharing contracts let companies book crude reserves for accounting ends.

Slideshow (3 Images)

But “the hydrocarbons beneath the surface are and will always be the property of the nation; in consequence, no participant in the oil industry will be able report the reserves of these products as assets,” it states.


The bill is a big departure from the service contracts now on offer, in which firms are paid a fee and can recover costs. It also goes well beyond the original proposal made by Pena Nieto in August, which was limited to profit-sharing contracts.

PRD lawmakers hope to call for a binding referendum to overturn the energy bill. The lower house approved legislation on Tuesday setting out how the government has to carry out such referendums, but the measure must still pass the Senate.

“This is an element of uncertainty that could impact investment decisions,” said Alberto Ramos, an economist at Goldman Sachs in New York.

Polls have shown a wide range of opinion on the issue.

A survey published in June by the Mexico City-based CIDE university showed the 65 percent of Mexicans opposed foreign investment in the oil industry.

Another poll by the newspaper Excelsior in August showed 63 percent backed Pena Nieto’s plans to change the constitution to allow more private investment in the energy industry.

Jesus Zambrano, leader of the PRD, said the government faced a long fight over the bill and pledged to carry his opposition into the mid-term election year of 2015.

Speaking to a crowd of hundreds next to the Angel of Independence, the victory column on Mexico City’s famous boulevard, Paseo de la Reforma, Zambrano pledged to turn the bill into a vote on Pena Nieto’s administration.

“Our strategy now will be from 15 to 15, from the end of this period of Congress (December 15) to 2015,” he said, before turning to the referendum question. “I‘m sure people will take part in it as though it were a presidential election.”

Additional reporting by Lizbeth Diaz, Alexandra Alper, Michael O'Boyle and David Alire Garcia; Editing by Simon Gardner, David Storey and Jackie Frank

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