December 10, 2013 / 10:09 AM / 5 years ago

Mexican lawmakers send energy reform bill to Senate floor

MEXICO CITY (Reuters) - Mexico’s Senate on Tuesday moved a step closer to passing reforms to open up the country’s oil industry to private investment, sending a draft bill to the floor of the upper chamber to speed up the approval process.

Senators of the Party of the Democratic Revolution (PRD) hold placards and a Mexican flag while interrupting a debate on an energy reform bill at the Senate in Mexico City December 9, 2013. The placards read, "No to the privatization of Pemex". REUTERS/Henry Romero

The bill, backed by the ruling Institutional Revolutionary Party (PRI) and the opposition conservative National Action Party (PAN), would mark the biggest strategic shift since the world’s no. 10 oil producer nationalized the sector 75 years ago.

It aims to let private firms partner with ailing state oil firm Pemex via profit-sharing, risk-sharing and service contracts as well as licenses.

Senate committees overseeing the bill gave it general approval on Monday before beginning a protracted debate on reservations raised by leftist lawmakers trying to derail it.

As debates moved into Tuesday morning, the three committees dominated by the PRI and the PAN took advantage of a procedural technicality and agreed to move the bill to the floor of the Senate to vote on remaining reservations there.

The move was intended to counter stalling tactics of leftist opponents of the reform led by the Party of the Democratic Revolution (PRD), which is fighting hard to stop the bill passing this year as the government wants.

The Senate will reconvene later on Tuesday.

The revised draft of the bill was a positive surprise for many in the oil industry, and the government hopes it will help stem a decade-long slide in crude oil output.

The energy reform is seen helping drive economic growth in Mexico, which would underpin the peso. The currency rallied on Monday to a seven-week high.

Once the Senate has passed the bill, it must head to the lower house of Congress to be voted on.


The reform is a cornerstone of an economic program that President Enrique Pena Nieto hopes will boost long-lagging growth in Latin America’s No. 2 economy.

It would allow private investors to drill for the country’s oil, and although 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.

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 step forward from the service contracts now on offer, in which companies 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.

Reporting by Dave Graham, Adriana Barrera, Michael O'Boyle, David Alire Garcia, Ana Isabel Martinez and Alexandra Alper; Editing by John Stonestreet

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