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Mexico: oil sector

Monday, August 12, 2013

The administration of President Enrique Peña Nieto this week will propose constitutional changes, which would let private companies, local and foreign, participate in projects to explore and exploit Mexican oilfields.

The country’s left, including the Democratic Revolution Party (PRD in its Spanish initials), led by the popular ex mayor of Mexico City, Andres Lopez Obrador, opposes the plan as a sell-out of national interests to capitalists.

But the PRD is a minority in the Mexican Congress.

With support from the National Action Party, Peña should have a two-thirds majority, enough to change to the Mexican constitution, including the proposed new rules.

Peña’s plan would allow private-public joint ventures, which share profits from individual operations.

Such an arrangement could be less attractive to private companies, than the right to work alone on individual projects.

On the other hand, Peña’s compromise may make it possible to get approval for changes to Petróleos Mexicanos (Pemex), which since 1938 has had a monopoly over the country’s oil business, and which is a national icon for many Mexicans.

Pemex needs to cut costs and to attract investment, especially in technology, if it is to become efficient, claim reformers.

Over the past seven years, Mexican oil output fell from 3.9 million barrels a day to 2.9 million, according to the Energy Information Administration of the United States.