Excerpt from WorldTrade Executive's
North American Free Trade & Investment Report
By Jorge Jiménez (López Velarde, Heftye y Soria)
On April 8 Mexico’s President Felipe Calderón submitted to the Mexican Senate a long-expected set of bills for the so-called “energy reform.” After testing the waters with the public and the media for several weeks with a campaign promoting strategic alliances for deepwater exploration and production, the Government decided for a rather moderate reform for the Mexican petroleum industry.
Instead of opting between a liberalization of the market and the strengthening of Pemex as a national oil company, the proposed reform seeks to obtain the best of both worlds: it opens up certain midstream and downstream activities to private investment, and provides Pemex with the flexibility and the tools to boost its infrastructure projects dealing with exploration and production. The reform leaves the Constitutional principles of ownership of the hydrocarbons and the prohibition of granting concessions and executing risk contracts untouched, with which it increases the spread of support along the ideological spectrum in Mexico. However, the reform also proposes to allow Pemex to enter into “performance-based” contracts, something that to this date has not been possible.
The reform contains these features:
- Contractual flexibility for Pemex to contract services outside of the currently burdensome and in many cases impractical framework of the government procurement laws.
- Adjusting Pemex to international corporate governance standards, by incorporating independent directors to its Board and providing the Board true management autonomy, as opposed to the status quo where Pemex plans are determined by the Ministry of Finance quasi-exclusively on the basis of short-term tax collection maximization and revenue production considerations.
- Liberalization of the transportation, distribution and storage of liquids and petrochemicals, subjecting such activities to the jurisdiction of the Energy Regulatory Commission.
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