Mexico may lift foreign investment ban on energy sector | All media content | DW | 13.08.2013
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Mexico may lift foreign investment ban on energy sector

Mexico’s president has proposed allowing foreign energy firms back into the country’s state-owned oil industry 75 years after they were thrown out. The reforms for Pemex would require changes to Mexico’s constitution.

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Mexican President Enrique Pena Nieto wants to allow the state oil monopoly Pemex to partner with private energy companies to explore for and produce oil and gas.

"Mexicans will remain the sole beneficiaries of the country's oil profits," Pena Nieto said as he presented his proposal, adding that "oil and other hydrocarbons will continue to be the exclusive assets of the nation."

The joint deals would use technology, expertise and capital from foreign companies to revive Mexico's oil and gas production, which has plunged about 25 percent in the past decade because of inefficiency. Pemex or Petroleus Mexicanos, formed in 1938 as Mexico's oil industry was nationalized, would maintain the state's ownership of all hydrocarbon resources. The company brings in about one third of the government's income, exporting about 85 percent of its oil to the United States.

The reforms proposed by Pena Nieto would alter two articles in Mexico's constitution to allow private companies to bid for profit-sharing contracts to explore and extract oil, and also apply for permits for refining and transportation. The idea is that third parties could help Pemex explore deep-water and other hard-to-reach areas that it cannot currently exploit.

If approved, Pena Nieto predicted that oil production could grow from 2.5 million barrels a day last year to 3 million in 2018 and 3.5 million by 2025. Peak production was in 2004, when the company generated 3.4 million barrels a day.

Pena Nieto, who has been in office for 8 months, could face significant political opposition to the changes. Leftist politicians oppose any constitutional amendments and plan to protest against what they consider the privatization of publicly owned resources. Jesus Zambrano, president of the Party of the Democratic Revolution, condemned the reforms. "If they want to keep full ownership of the oil, then why do they want to change the constitution?" Zambrano said. Zambrano's party is the third largest in Mexico's parliament.

The government of Mexico depends heavily on oil, with industry analysts estimating that Mexico has about 13.81 billion barrels of crude reserves. However much of it is in deep, complex deposits which are expensive and complicated to tap. Meanwhile, the country pays dearly for imported natural gas even though it sits on likely large deposits of shale gas.

Pemex has been plagued by safety problems in recent years including a gas explosion at its headquarters which killed 37 people in February and another explosion at a gas plant near the Mexico-US border, which killed 30 people in September 2012.

se/msh (AFP, AP)