Mexican President Enrique Peña Nieto proposed his plans to reform Mexico’s energy industry in an effort to ease restrictions on foreign investment.
The plan calls for amendments to articles 27 and 28 of the Mexican Constitution, which would permit foreign companies to invest in production of the nation’s oil and gas resources.
According to Peña Nieto, this reform will create 2.4 million new jobs within Mexico by 2025, increasing domestic production to 3.5MMbo/d, and lowering electricity rates and gas prices for Mexican citizens.
Peña Nieto’s proposal excluded offers for foreign investors to acquire ownership of Mexico's oil and gas, but will give them a share of the profits instead. He also insisted that Pemex—the nation’s state-owned monopoly—would not be sold, nor privatized.
"What (this reform) seeks to do is reach profit-sharing contracts which allow the nation to keep total control over the oil," said Peña Nieto. “Oil and gas reserves would remain under exclusive ownership of the state.”
Duncan Wood,director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, took to twitter to voice his support of Peña Nieto’s reforms.
“The energy reform proposal is comprehensive, profound and has potential to modernize,” Duncan said. “The tone was spot on, and the vision of the future entirely appropriate, but will profit sharing (vs. production sharing) be enough?”
Although big oil companies may prefer production sharing agreements, this proposal opens the possibility for foreign investors to participate in Mexico’s hydrocarbon exploration and production for the first time since 1938.
The proposals will be sent to Congress this week and political observers believe the reform will be passed with support from Mexico’s National Action Party (PAN) party. The Institutional Revolutionary Party (PRI) and PAN together hold two-thirds majority needed to make constitutional changes.
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