Mexico: Energy: Pena Nieto Announces Reform Proposal

British Embassy Mexico City

August 2013

Summary

President Enrique Peña Nieto presents proposal for energy reform. His plan would include constitutional change to allow for private investment in oil, gas and utilities. Attention now turns to discussion in the Senate and wider public reactions.

Detail

President Peña Nieto presented his proposal for Energy Reform on 12 August. Illustrating the significance of the event for his government and for Mexican society, the President’s announcement was broadcast live on all major networks and covered extensively by online and social media. The President formally signed the proposal ahead of its submission to the Senate.

The reform proposal centres around text changes to Articles 27 and 28 of the Constitution with the aim of allowing private investment in oil and gas as well as power generation. The ten key elements of the announcements are:

  1. The government will introduce the possibility for profit-sharing agreements between PEMEX and private entities for oil and gas exploration and production, as well as private licenses for refining, petrochemicals, transport and storage.

  2. There will be changes to the fiscal regime under which PEMEX currently operates, the detail of which will be elaborated in the fiscal reform to be presented by the President in September.

  3. PEMEX and its subsidiary companies will be restructured into two main branches: (i) Exploration and Production and (ii) Industrial Transformation.

  4. A new transparency regime for PEMEX.

  5. The development of a local content policy, aimed at strengthening the national supply chain for oil and gas.

  6. The removal of barriers for private generation of electricity, aimed particularly at renewables.

  7. State control of the national grid, reaffirming the government’s ownership of all transmission lines, aimed at ensuring private generators receive fair and competitive treatment.

  8. Cost reduction policies for electricity monopoly the Federal Electricity Commission (CFE) aimed at improving operational flexibility.

  9. A higher degree of policy influence for the Energy Ministry and the Energy Regulatory Commission.

  10. The promotion of low cost and low emissions sources such as solar, wind and clean gas.

Comment

Significant energy reform has the potential to transform the Mexican economy.   With the government’s proposals now on the table, public and parliamentary debate enters a new phase.  Given recommendations for constitutional change, the Bill must secure Senate approval. 

Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.

Sectors: Energy, Oil & Gas, and Renewable Energy
Countries: Mexico
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