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Mexico is sweeping away 75 years of nationalist protections and letting foreign companies back into its oil fields, after the Congress approved last night an historical bill that aims to generate as much as $20 billion in extra foreign investment a year.
In a country that celebrates “Oil Industry Nationalization Day” every March 18 since 1938, the energy package approved last night automatically becaome Mexico’s most significant and controversial economic reform since the North American Free Trade Agreement (NAFTA).
But critics to the legislation, which still needs the approval from 17 of Mexico’s 31 states as it changes the country’s constitution, are warning locals will now have to up to 50% more for gas now than during monopoly times.
According to Vanguardia (in Spanish), by opening the market the Mexican government will have to end current subsidies to gasoline and diesel that have kept prices relatively even for the past years.
On the other hand, says the report, an increased competition will help bringing down cost overruns at the state-owned Petróleos Mexicanos (Pemex) “due to the inefficiencies and corruption in both, the firm and its union.”
Critics are questioning whether the country’s authorities have the competence and will to regulate private contracts for the benefit of all Mexicans, rather than just a few.
“We don’t know how to regulate or supervise absolutely anything,” famous Milenio newspaper columnist Carlos Puig wrote on Tuesday (in Spanish). “We don’t know how to put a public transit concession in order. If we can’t do it with a few taxis, how are we going to do it with Exxon, Shell or BP?”
Despite being the world’s 10th biggest producer of crude oil, according to data from the US Energy Information Administration, Mexico’s output has fallen by a quarter since hitting a peak of 3.4 million barrels per day in 2004.
While oil and gas production in the US has soared thanks to shale deposits, some of which extend into Mexico, Pemex has failed to develop the resource. By passing the energy package reforms, Mexico will open its door to oil giants such as Exxon Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX) and BP (LON:BP) to develop the largest unexplored crude area after the Arctic Circle.
3 Comments
R.L.P
IT IS ABOUT TIME !!!! IN THE PAST ONLY PEMEX EXECUTIVES RECEIVED ALL THE WEALTH…..NOT PUTTING ANY MONEY BACK FOR EXPLORATION AND REFINERIES. NOW “MEXICO” AND BENEFIT MORE BY THE FEES AND TAXES
FROM FOREIGN OIL COMPANIES THAT WILL INVEST THE MONEY TO FIND NEW RESERVES . THIS CAN BENEFIT THE WHOLE COUNTRY INSTEAD OF A FEW. WEATHER IT DOES OR NOT, TIME WILL TELL.
Guest
They need to export more oil and tap into those shale reserves up north to get their utilities to burn more natural gas instead of oil. Mexico consumes roughly 56% of the oil it produces for power generation, while the vast majority of the rest comes from nat gas. Unfortunately, rampant corruption has screwed over the people of Mexico for decades, so hopefully, they will get something better out of this new situation.
KDM
Its about time Mexico started to allow foreign oil companies in, this is what makes an economy grow with exporting, a country can not consume all its resources itself, look at Canada, thats why the economy is doing pretty well in bad global conditions, by exporting our many natural resources. Mexico has greta potential with its rich oil and mining sectors, so lets hope the corruption dont kill it all because the people of Mexico deserve better( all Mexicans not just a certain few)