Mexican political parties reach accord on oilfield contracts
BY NACHA CATTAN & ADAM WILLIAMS
MEXICO CITY (Bloomberg) -- Mexico’s two largest parties reached a preliminary accord that would give companies more control in new oilfield contracts than the government is proposing, said three people with direct knowledge of the agreement.
The ruling PRI and opposition PAN parties will support a new measure to allow the state to decide the type of contracts to be offered for each project, including service contracts, profit and production sharing and licenses, two of the people said, asking not to be identified as talks are private. Like the concession model proposed by PAN, licenses would grant broader operational control of projects than the govenment’s initial profit-sharing model and allow companies to manage oil projects directly.
President Enrique Pena Nieto is seeking to end a 75-year state monopoly on pumping crude and to attract investment from companies like Exxon Mobil Corp. and Chevron Corp. to boost the $95 billion industry. The government says the bill, now before the Senate, would lift economic growth 1 percentage point by 2018 and help Petroleos Mexicanos return to output growth.
“If the bill that Congress decides is a bit more aggressive in terms of legal structures beyond profit sharing, or production sharing or licenses, we’re ready for that,” CEO Emilio Lozoya said in an October 31 interview. “What we have been advocating as the sole operator in the country is whatever legislation gives long-term legal certainty to investors.”
Representatives of the PAN and PRI parties didn’t immediately respond to requests for comment.
Mexico has the biggest proven oil reserves in Latin America after Venezuela and Brazil, with 13.87 Bbbl, and shale-gas resources that may be as much as 460 Tcf, according to data compiled by Pemex.
Pemex is interested in raising capital through real-estate trusts, known as Fibras, or structured securities known as CKDs, as soon as the Q1 of 2014, Pemex’s Lozoya said.
Without a reform, Pemex would need an estimated $1 trillion of investment for extraction of prospective reserves in the next 50 years, Lozoya said. To do so, current annual investment must be increased to $62 billion from $25 billion.
Analysts forecast 2013 economic growth of 1.24 % this year after a 3.9 % expansion in 2012, according to a central bank monthly survey published November 1.