Mexican government wants to end the state monopoly over the oil and gas extraction

Mexico to open gas fields to private sector

Mexico plans to end the state monopoly over gas and oil reserves by signing partnerships with the private sector, the country’s government official said.

The energy reform bill proposed last week by Mexico’s president Enrique Pena Nieto targets deep water oil and shale gas reserves the state-back giant Pemex has been unable to exploit due to limited funds and technology.

The private firms will, however, also get the chance to operate in shallow-water deposits, in which Pemex is a specialist. The cooperative framework between the new private players and Pemex is expected to be in place by the mid-2014.

"The scheme we are proposing will not be limited to any single type of field," said Enrique Ochoa, the deputy energy minister responsible for hydrocarbons.

The reform’s proponents believe it will boost Mexico’s economic growth and help to bring the country’s industry into the 21st century. To push the reform forward, the President would have to find support across the political spectrum by the end of the year as the venture requires changes in two articles of Mexico’s constitution.

If the undertaking is successful, state-operated Pemex will be given the chance to choose fields it wants to exploit by itself, while running operations in those remaining jointly with selected private firms.

It has not been disclosed yet how the contracts between Pemex and the private investors would be structured nor how the profits would be divided up.

"Without a doubt, they will be designed and regulated by the secondary laws which will have to position them as internationally competitive," said Economy Minister Ildefonso Guajardo, who oversees trade and industry.

 "The profit-sharing contracts will be drafted to give businesses the best possibilities to obtain the financing and capitalisation that they need to carry out their developments according to best international practices," added Ochoa.

Finance Minister Luis Videgaray said Mexican government could possible aim at taking about 50 per cent of the profits with the exact value differing contract by contract. For example the US government takes on average 50 per cent from deep water developments in the Gulf of Mexico, while Brazil takes nearly 70 per cent.

Despite the reforms, the ownership of oil and gas reserves will stay in state hands. The new bill, largely supported by conservatives will probably be challenged by left-wing politicians who are against any privatisation.

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