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Page added on December 7, 2013
Mexico New Bill to Open Oil Fields
Senators from Mexico’s two biggest political parties have released a bill to break the nation’s 75-year oil monopoly by amending the constitution to allow production sharing contracts and licenses for outside producers.
The joint legislation would allow private companies such as Exxon Mobil Corp. (XOM) to develop fields in the largest unexplored crude area after the Arctic Circle as state-owned Petroleos Mexicanos seeks to reverse eight straight years of falling output. The bill comes after four months of political wrangling following the release of separate plans from President Enrique Pena Nieto’s ruling Institutional Revolutionary Party, or PRI, and the opposition National Action Party, known as the PAN.
Senators from the two parties, which with congressional allies have a two-thirds majority needed to pass the bill, want to amend the nation’s charter to allow private and foreign oil companies to pump crude in Mexico for the first time in more than seven decades. The government says approval of an energy overhaul, which Pena Nieto has billed as the cornerstone of his administration, would lift economic growth 1 percentage point by 2018 and reverse oil production losses.
Similar to the concession model proposed by PAN, licenses would grant broader operational control than the govenment’s initial profit-sharing model and allow companies to manage oil directly. The bill also calls for the creation of a sovereign fund, originally proposed by PAN, that would be used to manage oil profits from the $95 billion energy industry for long-term investment and savings.
2 Comments on "Mexico New Bill to Open Oil Fields"
MrEnergyCzar on Sun, 8th Dec 2013 4:10 am
Bills don’t reverse geology….
rockman on Sun, 8th Dec 2013 1:58 pm
“…to develop fields in the largest unexplored crude area after the Arctic Circle…”. A truly bizarre statement from a liar or who is unbelievably ignorant of México petroleum history.
Here’s a brief history of this huge “unexplored” area:
Commercial production of crude oil began in 1901. By 1910 systematic explorations by foreign companies came to supersede the uncoordinated efforts of speculative prospectors. Mexico began to export oil in 1911.
Article 27 of the constitution of 1917 gives the Mexican government a permanent and inalienable right to all subsoil resources. The government’s efforts to assert this right produced a lengthy dispute with foreign oil companies that was not resolved until the companies were nationalized in the late 1930s. The 1923 Bucarelli Agreements committed the United States and Mexico to regard titles held by foreign oil companies as concessions by the Mexican government rather than as outright ownership claims.
Despite disruption caused by the Revolution, Mexico’s oil production peaked in 1921 at 193 million barrels (some 25 percent of world production), largely as a result of increased international demand generated by World War I. During much of the 1920s, Mexico was second only to the United States in petroleum output and led the world in oil exports. By the early 1930s, however, output had fallen to just 20 percent of its 1921 level as a consequence of worldwide economic depression, the lack of new oil discoveries, increased taxation, political instability, and Venezuela’s emergence as a more attractive source of petroleum. Production began to recover with the 1932 discovery of the Poza Rica field near Veracruz, which became Mexico’s main source of petroleum until the late 1950s.
By 1975 Mexico’s oil output once again exceeded internal demand, providing a margin for export. President López Portillo announced in 1976 that Mexico’s proven hydrocarbon reserves had risen to 11 billion barrels. They rose further to 72.5 billion barrels by 1983. López Portillo decided to increase domestic production and use the value of Mexico’s petroleum reserves as collateral for massive international loans, most of which went to Pemex. Between 1977 and 1980, the oil company received US$12.6 billion in international credit, representing 37 percent of Mexico’s total foreign debt. It used the money to construct and operate offshore drilling platforms, build onshore processing facilities, enlarge its refineries, engage in further exploration, prove fresh reserves, and purchase capital goods and technical expertise from abroad. These investments helped to increase petroleum output from 400 million barrels in 1977 to 1.1 billion barrels by 1982.