Mexico: Energy: Pena Nieto Announces Reform Proposal
British Embassy Mexico City
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.
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:
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.
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.
PEMEX and its subsidiary companies will be restructured into two main branches: (i) Exploration and Production and (ii) Industrial Transformation.
A new transparency regime for PEMEX.
The development of a local content policy, aimed at strengthening the national supply chain for oil and gas.
The removal of barriers for private generation of electricity, aimed particularly at renewables.
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.
Cost reduction policies for electricity monopoly the Federal Electricity Commission (CFE) aimed at improving operational flexibility.
A higher degree of policy influence for the Energy Ministry and the Energy Regulatory Commission.
The promotion of low cost and low emissions sources such as solar, wind and clean gas.
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.
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