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Mexico’s proposed energy laws market positive, analysts say

ADAM WILLIAMS

MEXICO CITY (Bloomberg) -- The energy legislation draft approved by Mexican senate committees is favorable given low national content requirements and short-term economic growth prospects, according to analysts.

The proposed secondary energy laws call for a 25% national content minimum for incoming companies by 2015 that will increase to 35% by 2025. The minimum requirements for national content, which is the amount of obligatory Mexican supplies in each new energy project, “won’t bother anybody” and are reasonable compared to other countries, according to Steve Otillar, partner at Akin Gump Strauss Hauer & Feld LLP.

“It is definitely within the range of reasonable numbers that you see, if anything perhaps on the low side,” Otillar said of the national content requirements in a phone interview from Houston. The national content figures are “nothing to worry about” for international oil companies considering Mexican investment, said George Baker, publisher of Mexico Energy Intelligence newsletter, in a telephone interview.

The rules proposed by Senate committees will guide the implementation of constitutional amendments to open Mexico’s state-controlled energy industry to private investment. The overhaul ending the 75-year monopoly on oil production by Petroleos Mexicanos will attract up to $12 billion by 2016 and $50 billion by 2020, according to a research note of Gabriel Casillas, chief economist at Grupo Financiero Banorte SAB.

Encouraging Signs

Content of the proposed legislation is “fairly pro-market” and economic productivity will likely increase as new energy projects get underway, Benito Berber, strategist at Nomura Holdings Inc, said in a research note.

The progression of the energy legislation, which will be debated in the senate July 17 and is expected to receive a final vote by next month, was applauded by Stefan Olivier, CEO of Astar Minerals PLC, in an emailed statement.

“We are greatly encouraged by the progress being made by Mexico to reopen its energy sector to international capital,” Olivier said. “We are working hard to ensure that once the new regulatory framework is in place, Astar Minerals is well placed to be an early mover in what will be a new vast hydrocarbon province for the private sector.”

07/17/2014

 

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