10 December 2013, News Wires – Three Mexican Senate committees on Monday gave general approval to an energy bill that would open up the world’s tenth-biggest oil producer to private investment and mark the industry’s most dramatic overhaul in 75 years.
The hotly-debated bill, which would allow private firms to partner with ailing state oil giant Pemex through licenses and profit and production sharing contracts, will now need final approval from the committees, which are set to start exhaustively debating the details later on Monday, Reuters reported.
The bill, announced by centrist ruling party and opposition conservative lawmakers on Saturday, would let private firms partner with ailing state oil firm Pemex via profit-sharing, risk-sharing and service contracts as well as licenses in a bid to stem an output slide, Reuters reported.
Mexico’s peso rallied sharply on Monday morning to a seven-week high on the back of the weekend presentation of the revised version of the reform, which was bolder than expected.
Senate committee lawmakers debated the bill on Sunday, but did not wrap up speeches in time for a vote.
They are set to resume their session on Monday, and are widely expected to sign off on the bill. It then heads separately to the full Senate and lower chamber for votes.
The reform, which would keep ownership of crude in state hands, is a cornerstone of an economic reform drive that President Enrique Pena Nieto hopes will boost long-lagging growth in Latin America’s number 2 economy.
It would allow private investors to drill for the country’s crude but stops short of full-blown concessions that oil majors had been hoping for.
Companies will not be allowed to book oil reserves on their balance sheets, as many had hoped, though they will be able to report projected revenue from agreed contracts for accounting purposes.
It marks is a big step from the service contracts now on offer, under which companies are paid a fee and can recover costs.
It also goes well beyond the proposal made by Pena Nieto in August, which was limited to profit-sharing contracts.
Pena Nieto, who has also pushed through an overhaul of Mexico’s tax rules, telecoms sector, bank lending regulations and education system, hopes to pass the energy reform before Christmas but lacks a majority in Congress.
He needs the support of conservatives to push the bill through after the leftist Party of the Democratic Revolution (PRD), which opposes opening the oil sector, pulled out of talks.
PRD members on Sunday called the bill “national treason” while centrist ruling Institutional Revolutionary Party (PRI) lawmakers and conservative opposition figures sang its praises.
The draft marks a major break with tradition in Mexico, where assets of foreign oil companies were expropriated in 1938 to create Pemex, which is a symbol of national pride.