A Bold Proposal for The Energy Reform

MEXICO - In Brief 08 Dec 2013 by Esteban Manteca
The long wait is over. PAN and PRI have presented a draft of the energy reform that is currently being discussed in the Senate, where the debate is expected to continue until Monday, before it passes to the Chamber of Deputies. It is a bold proposal that allows for private investment in power production and comercialization, and in all the hydrocarbon activities. The draft goes further than the President's original proposal, and allows not only for profit sharing, but also for production sharing agreements in the oil sector. As we anticipated in several of our weekly reports, the proposal is closer to the PAN's position. It modifies three articles of the Constitution (Art. 25, 27 and 28), includes "licenses" -rather than concessions- that allow for the exploitation of a given field by private companies for a certain period of time, and creates a Petroleum Fund, that will be administered by the Central Bank. In a nutshell, the reform includes the following changes Modification of three articles of the Constitution. The whole hydrocarbon and energy sectors stop being "strategic", which means that the Mexican State ceases to be the sole responsible of their development. Private investment will be possible in refining, petrochemicals, and natural gas process. The extraction, exploration and production of oil can have private participation through contracts with the Mexican State. Pemex and CFE cease to be state-administered companies, and become "productive companies", which will compete with other private companies. These modifications take Pemex out of the Federal Budget, and allow it to have full managerial autonomy. However, the labor union remains as a major actor in ...

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