Mexico President Proposes Energy Reform to Lure Investment End to Mexican Oil Monopoly Could Bring in Foreign Majors by Tsveta Zikolova, 15:55 BST, Aug 14 20130 Print* EmailDecrease font sizeFont sizeIncrease font size Mexico President Proposes Energy Reform to Lure Investment iNVEZZ Wednesday, August 14th: Mexico’s President Enrique Pena Nieto has come up with an energy reform proposal, which is likely to induce big oil companies such as ExxonMobil Corporation (NYSE:XOM) and Chevron Corp (NYSE:CVX) to bid on Mexican oil contracts. The proposed reform will end a 75-year state energy monopoly. Mexico’s President Proposes Historic Changes to Oil Sector As Bloomberg has reported, President Pena Nieto on Monday submitted a proposal to Congress to change articles 27 and 28 of the constitution. If enacted, the proposed reform would allow companies such as ExxonMobil and Chevron to pump oil in Mexico for the first time since 1938 when Lazaro Cardenas, Mexico’s president at the time, nationalised the country’s energy industry, seizing fields from British and US companies. Deputy Energy Minister Enrique Ochoa has explained that foreign companies would receive a portion of profit within a risk-sharing model allowing them to book a percentage of reserves under US Securities and Exchange Commission (SEC) rules. “It seems like there’s real progress in the government’s thinking about reserves,” Bloomberg quoted energy consultant George Baker as saying. “The possibility needs to be explicitly shown in the regulatory law.” The government is also planning to split state monopoly Petroleos Mexicanos, known as Pemex, into two units, and end the state’s electricity generation monopoly, Comision Federal de Electricidad (CFE). Mexico has the biggest proven oil reserves in Latin America after Venezuela and Brazil, estimated at nearly 14 billion barrels. Bloomberg quoted data by Pemex as showing that the country had shale gas resources, probably as much as 460 trillion cubic feet. The oil monopoly has also said that with the proper investments and technology, about 27 billion barrels of crude in the deep waters could be added to Mexico’s proven reserves. Bloomberg quoted Kurt Glaubitz, a Chevron spokesman, as saying that the US energy company welcomed “any decision by the government and people of Mexico to provide new opportunities for investments”. ExxonMobil has not yet commented on the proposed reform. Plan Seen as Not Enough Although the reform would end the 75-year state energy monopoly, the proposal avoids giving energy companies ownership of Mexico’s oil and gas reserves but instead gives them a share of profits. Reuters quoted an unnamed executive with an independent US-based oil company as commenting that the proposal lacked the main element required by oil companies. “If the operators aren’t going to own the reserves, it would be really hard to view the reform as a game-changer,” the executive has told Reuters. “That’s how we’re judged by Wall Street, by growing production and growing reserves.” In its coverage of the news Reuters also quoted Mexico’s Energy Minister Pedro Joaquin Coldwell as noting that the government has “not spoken with the big oil companies” about the reform.
Posted on: Thu, 15 Aug 2013 03:42:25 +0000
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