Exclusive: Mexico's draft energy reform spans profit-sharing to licenses

Sat Dec 7, 2013 6:07pm EST
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By Dave Graham, Adriana Barrera and Simon Gardner

MEXICO CITY (Reuters) - Mexican lawmakers unveiled a draft energy bill on Saturday that includes contracts ranging from profit-sharing and risk-sharing to licenses to lure private investment, in what would be the biggest opening in the world's No. 10 producer in decades.

Approval of the bill would mark the end of the decades-long oil and gas monopoly held by state-run Pemex, which is struggling to reverse a sharp slide in oil output due to years of chronic under-investment.

The bill, which would keep ownership of crude in state hands, is at the center of an economic reform drive that President Enrique Pena Nieto hopes will boost long-lagging growth in Latin America's second-largest economy.

The reform would allow private investors to drill for the country's oil and stops short of full-blown concessions that oil majors had been hoping for.

But it is a big step from the service contracts currently on offer, under which companies are paid a fee and are able to recover costs, and also goes well beyond the proposal made by Pena Nieto in August, which was limited to profit-sharing contracts.

"That's the most aggressive, forward-looking concept that they have ever put forward," George Baker, the publisher of industry newsletter Mexico Energy Intelligence, said about the inclusion of licenses.

"That's basically like a concession, meaning you have the rights to produce the oil and commercialize it," he added. "They don't want to use the term concession, because it's just a politically loaded term in Mexican history. They'd rather use a term like license or contract."

Pemex was created after a 1938 expropriation and is both a symbol of nationalist pride and a major earner for the federal budget. The government hopes the overhaul of the lumbering giant will serve as an engine for growth.   Continued...

Mexico's President Enrique Pena Nieto addresses the audience during The Economist's Mexico Summit 2013 in Mexico City November 7, 2013. REUTERS/Tomas Bravo