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Mexico lawmakers discuss oil industry overhaul

Wednesday - 12/11/2013, 8:44pm  ET

An opposition lawmaker holds a sign that reads in Spanish: "we defend Pemex" as he occupies the podium at the National Congress in protest against the newly approved energy reform bill in Mexico City, Wednesday, Dec. 11, 2013. Mexico's Senate, the early hours of Wednesday approved the most dramatic oil reform in decades, moving the country closer to opening its state-run sector to private companies and investment. (AP Photo/Marco Ugarte)

E. EDUARDO CASTILLO
Associated Press

MEXICO CITY (AP) -- Just hours after Senate passage, Congress' lower house on Wednesday began a floor debate on legislation that would open Mexico's state-run oil industry to private investment, rejecting an effort by leftist opponents to first have committees review the bill.

Senators voted 95-28 early in the day in favor of the most dramatic overhaul of the country's oil sector in decades.

Dozens of leftist lawmakers then seized control of the House of Deputies, using chairs and tables to block access to the chamber in a failed attempt to block discussion of the measure. "The homeland is not for sale! The homeland is to be defended!" they shouted while holding protest signs and Mexican flags.

Other lawmakers convened in a room nearby, however, and voted for the body to immediately begin debating the bill and bypass discussing it in committees.

Two of the country's three main parties are backing the bill, which would allow the government to grant contracts and licenses for exploration and extraction of oil and gas to multinational firms, something currently prohibited by Mexico's constitution.

If the bill is passed by the lower house, it would then need to be approved by the legislatures of 17 of Mexico's 31 states.

It's the crowning piece of President Enrique Pena Nieto's first year of reforms, which have also targeted education, the tax system and telecommunications. But the energy overhaul is considered most crucial to the overall economy and the remaining five years of Pena Nieto's presidency.

Under the legislation, contracts could be made directly with the state rather than with the state-run oil company, Petroleos Mexicanos, which would lose its monopoly on Mexican oil. The bill would allow contracts for profit- and production-sharing as well as licenses under which companies would pay royalties and taxes to the Mexican government for the right to explore and drill.

Private companies would have to specify in contracts that all oil and gas found belongs to Mexico. The constitution would continue to prohibit oil concessions, considered the most liberal kind of access for private oil companies.

Opponents said the proposal would shift to a system that has been proven a "total failure."

The opponents argue that Mexico's people should decide on such a big change.

"We want a referendum on this," said Congressman Alejandro Sanchez, a member of the leftist Democratic Revolution Party, or PRD.

Analysts contend Mexico needs to let in private investment to save its oil sector. While oil output has been rising in the U.S. and Canada, Mexico's production has fallen 25 percent since 2004 despite increased investment. Pemex also has been unable to exploit the country's deep-water deposits and shale oil and gas reserves.

Operations allowed by the proposal have been prohibited since 1938, when President Lazaro Cardenas nationalized the oil industry, a step written into the constitution to protect the country from possible profiteering by foreign companies.

The energy bill was hashed out by Pena Nieto's Institutional Revolutionary Party, or PRI, and the conservative National Action Party, which wants the energy industry to be as open as possible to investment and partnership possibilities.

The PRI has been more moderate, given the leftist opposition that has drawn thousands in street protests.

But the mobilization by leftists so far hasn't been as great as in 2008, when former presidential candidate Andres Manuel Lopez Obrador all but killed a congressional attempt to open the oil industry to greater private investment. Lopez Obrador has been sidelined by a heart attack, but protesters have been out every day the past week to oppose the oil reform.


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