Approach seen helping proposal for Mexican energy reform

A middle-ground approach that leaves details to legislation improves chances the Mexican Congress will pass constitutional amendments reforming the state-centered hydrocarbon regime.

Jose Valera, Mayer Brown partner, global energy, describes the Aug. 12 reform proposal by Mexican President Enrique Pena Nieto like this (OGJ Online, Aug. 13, 2013): “What he does is clean the slate.”

At a Mayer Brown seminar, Valera explained the proposal returns crucial parts of the constitution to language written after nationalization of the oil industry in 1938, deleting restrictions enacted legislatively since then.

If Congress passes Pena Nieto’s proposal, the constitution will make three key points, Valera said:

• Hydrocarbons in place belong to the state.

• The government will grant no concessions—in the strict sense of the term in which resource ownership changes hands.

• Congress should set energy policy and determine terms of participation by investors in oil and gas activity.

Valera said elimination of restrictions in Pena Nieto’s proposal extends beyond exploration and production to those now applying to refining and other oil and gas operations.

Dallas Parker, cohead of Mayer Brown’s Global Oil and Gas Practice, praised the proposal as “a stroke of genius” because of the way it focuses on constitutional reform and leaves details to later legislation.

Constitutional changes require assent by two-thirds votes in both houses of Congress, he explained. Enabling laws require majority votes.

“Details are likely to be a bit more controversial” than basic constitutional reforms, he said.

Other proposals

Duncan Wood, director of the Mexico Institute at the Woodrow Wilson International Center for Scholars, pointed out that Pena Nieto’s initiative followed and is less ambitious than a reform proposal by the opposition National Action Party (PAN) (OGJ Online, Aug. 12, 2013). It preceded and is more ambitious than a proposal by liberal Party of the Democratic Revolution (PRD), which would reform state-owned Petroleos Mexicanos but leave the government firmly in control of hydrocarbon activity.

In oil and gas, the proposal by Pena Nieto, who leads the Institutional Revolutionary Party (PRI), would:

• Allow Pemex to enter “profit-sharing” contracts with private and foreign oil firms.

• Cut the government’s claim on Pemex revenue, now so high the company is unprofitable.

• Reorganize Pemex into upstream and downstream divisions.

• Improve Pemex transparency and accountability.

• Set a national content requirement.

The proposal also would restructure the electricity industry.

Together, PRI and PAN control enough votes to assure passage of constitutional reform.

Open questions

Important questions that would be left to secondary legislation, Wood said, are whether participation terms will extend to production-sharing or be limited to profit-sharing. Although the government now is discussing only the latter, Congress could allow production-sharing arrangements under wording of the proposal.

Another question is whether the government would allow non-Mexican oil and gas companies to book reserves, now explicitly prohibited. He said the government understands the need to allow reserves-booking.

Other open questions are rates of taxes and royalties, the national-content percentage, and the entity that would regulate terms of participation.

Wood said use by the Pena Nieto proposal of wording in constitutional provisions adopted in 1940 will help overcome political resistance in a country where “privatization is still a dirty word.” 

Protests organized by PRD representatives opposing the Pena Nieto reforms have fizzled, he added.

If Congress acts according to government plans, he said, it will approve the constitutional changes this fall. The government then would present secondary laws for approval late this year and early in 2014.

The first profit-sharing contracts under a new system could be issued for bidding in the second half of next year, Wood said.

Contact Bob Tippee at

Related Articles

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...

MARKET WATCH: Oil prices decline as US crude inventories post first gain in 9 weeks

07/01/2015 Oil prices on July 1 surrendered much of their gains from the day before after the release of a government report showing the first rise in US crud...

FWS issues Shell letter of authorization on Chukchi Sea lease

07/01/2015 The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a letter of authorization (LOA) related to the potential disturbance of polar b...

USGS: Water usage for fracturing varies widely across shale plays

07/01/2015 The volume of water required to hydraulically fracture wells varies widely across the country, according to the first national analysis and map of ...

Case for Keystone XL has grown stronger, TransCanada tells Kerry

06/30/2015 Canada is taking strong steps toward combating climate change, and the proposed Keystone XL pipeline crude oil pipeline remains in the US national ...

Forum extends study of subsea integrity


Work by an industry forum called SURF IM Network, which studies oil and gas subsea integrity management, has been extended by 3 years.

Survey begins of collaboration on the UKCS


Deloitte has begun a survey about collaboration in the oil and gas producing industry of the UK Continental Shelf.

Lytle named to Canada’s National Energy Board


Murray Lytle has been appointed as a full-time member of Canada’s National Energy Board for a term of 7 years, effective July 6.

White Papers

Definitive Guide to Cybersecurity for the Oil & Gas Industry

In the Oil and Gas industry, there is no single adversary and no single threat to the information tech...

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by
Available Webcasts

Better Data, Better Analytics, Better Decisions

When Tue, Oct 27, 2015

The Oil & Gas industry has large amounts of data stored in multiple systems which are purpose built for certain tasks. However, good decisions require insights based upon the data in all of these systems. These systems in turn do not talk to each other. So the process of analyzing data, gaining insights, and making decisions is a slow one and often a flawed one. Good decisions require accurate analytics and accurate analytics require superior/sustainable data quality and governance. This webinar focuses on:

  • The importance of data quality and governance
  • How technological advances are making data quality and governance sustainable in order to get the accurate analytics to make solid decisions.

Please join us for this webcast sponsored by Seven Lakes Technologies and Noah Consulting.


Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected