Pena Nieto bill opts for Mexico oil sharing pacts

Mexican President Enrique Pena Nieto will probably seek to amend key articles of the constitution to break the nation’s state monopoly on oil exploration and production, ruling party lawmaker Javier Trevino said.

Trevino, a secretary on the lower house’s energy committee, said in an interview the bill will likely change articles 27 and 28 of the charter to allow either production or profit sharing contracts between private companies and Mexico’s state-owned oil interest. The proposal probably won’t offer concessions to companies, said Trevino, who has knowledge of the government’s bill scheduled to be presented next week.

Pena Nieto is pledging to open the energy industry to private investment to double growth that’s fallen behind the regional average over the past decade. The government’s bill will likely require oil sharing contracts be managed by regulators and the government, instead of by the state-owned oil company Petroleos Mexicanos, Trevino said.

“We expect a reform to strengthen and transform Pemex,” Trevino said. The bill will also likely “strengthen the role of the regulatory body.”

The bill by Pena Nieto and his Institutional Revolutionary Party will be presented next week and first be debated by the Senate. The government’s proposal will follow a bill presented July 31 by the opposition National Action Party that seeks concessions for private companies to explore and produce oil.

Under a typical concession regime “hydrocarbons underground will belong to the State, but when it reaches the wellhead it automatically passes to” the international oil company, Michael Bunter said in his book “The Promotion and Licensing Of Petroleum Prospective Acreage.” In profit sharing accords, crude is the property of the state until the country sells the petroleum, he said.

The Energy Ministry’s press office didn’t immediately respond to phone calls and an e-mail requesting comment before business hours in Mexico City.