Mexico’s Senate approved additional legislation to help open the country’s energy sector to private companies for the first time in more than seven decades, a move decried as treasonous by opponents.
The Senate voted 90 to 28 today to approve a bill that sets a framework for oil and gas contracts for companies entering the country such as Chevron Corp. and Exxon Mobil Corp. The landmark legislation opens the state-run crude monopoly held by Petroleos Mexicanos since 1938. Three other proposals that will open the electricity sector and set guidelines for state-owned companies and their employees will be debated today and over the weekend.
The bills, which require approval from the lower house and President Enrique Pena Nieto, add contract specifications to an energy law approved last year trumpeted by the government as the biggest economic overhaul since the North American Free-Trade Agreement. The energy law, which modified three constitutional amendments, will allow outside oil companies to help produce an estimated 113 billion barrels of untapped Mexican crude.
“The approval of this package of secondary laws will boost private investment to as much as $50billion in 2020,” from $10billion to $12billion in 2016, Gabriel Casillas, chief economist at Grupo Financiero Banorte SAB, said in a July 16 research note. “The approval and implementation of the energy reform could add 1 percentage point to the gross domestic product in the long term.”
Debate on the four bills, which encompass 4,249 pages detailing new rules for the energy and electricity industries, began Thursday and continued until early Friday morning. Opponents, primarily from the Democratic Revolution Party, or PRD, denounced the move as treason.
“In what empty heart, without soul, could we give away our national riches?” Senator Fernando Enrique Mayans, a PRD member, said from the central podium of the Senate floor. “There are no Mexicans with guts that are defending our country here in the Senate.”
Mayans compared the energy law to the 1999 movie “La Ley de Herodes.”
“You saw what happened in the movie,” Mayans yelled. “A Mexican opens the door for a gringo to enter the home to install a light and he ended up running off with his wife.”
The legislation creates a requirement that private companies source at least 25 percent of their supplies locally by 2015. The threshold will increase to 35 percent by 2025. It also establishes a minimum 20% participation in cross- border fields for Pemex, as the state-owned company is known.
Mexico’s National Hydrocarbons Commission will grant exploration rights to companies and oversee the drilling of exploratory wells, according to the legislation.
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