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Mexico to reform state-run oil sector

A Mexican Senate committee unveiled a proposal Saturday to reform the state-run oil sector, opening the door to private companies and investment for the first time in decades.

The ambitious plan to reform Mexico’s energy industry and state oil giant Pemex would allow the government to let private firms explore for and extract oil and gas, a practice currently banned by the constitution. It maintains however the existing ban on oil concessions.

The committee will begin discussing the proposal on Sunday, and expects to submit it for consideration by the full Senate next week.

Changes to the oil sector strike at the heart of modern Mexico’s national identity. In 1938 then president Lazaro Cardenas nationalised the foreign-operated oil industry, a wildly popular move that asserted Mexico’s right to its own mineral wealth. Cardenas also founded Pemex, which despite its many problems remains one of the country’s most important sources of income from exports.

Pemex oil production has fallen from 3.4 million barrels per day in 2004 to 2.5 million in the third quarter of 2013. Critics say the company has failed to invest in equipment maintenance and exploration, it is riddled with inefficiencies, and its unions are bloated and corrupt. In August, President Enrique Pena Nieto unveiled a controversial reform plan to open the oil sector to foreign investments in order to increase production and modernise the state-run company.

Reforming the energy sector would be one of the most outcomes of the Pact for Mexico, an agreement between the country’s main political parties and the Pena Nieto administration to move ahead a package of major structural reforms.