Oil production may be contracted

Thursday, 07 November 2013 00:10 BY DAVE GRAHAM
AND MIGUEL GUTIÉRREZ
Reuters


MEXICO CITY – Mexico could offer oil companies incentives that go beyond planned profit-sharing contracts when Congress passes the government’s energy reform, two senior officials from the ruling Institutional Revolutionary Party (PRI) said on Tuesday.

President Enrique Peña Nieto put forward an energy reform in August that envisages creating profit-sharing schemes for private investors in Mexico’s oil industry, which has been dominated by state oil monopoly Pemex for 75 years.

It is the cornerstone of a wide-reaching reform package he hopes will boost growth in Latin America’s No. 2 economy and lift its energy industry into the modern era.

However, officials in the party say it may be necessary to show more flexibility to attract the kind of capital Mexico needs to exploit its oil and gas resources, and put a stop to a slide in crude production over the past decade.

That could involve permitting production-sharing contracts, and Marco Bernal, a PRI lawmaker who heads the energy committee in the lower house of Congress, said the party was exploring further options to ensure Mexico made the most of the reform.

Allowing profit- or production-sharing contracts is a major departure for Mexico, and Peña Nieto’s plan involves changing the constitution to do so. That will require a two-thirds majority in Congress, which the PRI is hoping to achieve with the aid of the center-right National Action Party, or PAN.

The PAN is pushing for an energy reform involving full blown concessions and senior officials in the party have said they will not back Peña Nieto’s reform unless it offers more.

Mexico has the biggest proven oil reserves in Latin America after Venezuela and Brazil, at nearly 14 billion barrels. PRI Chairman Cesar Camacho, who says concessions are completely off the table, said negotiations still lay ahead.