Mexico takes first step in opening state-run oil sector to private investors

Turning a page in a 75-year history of nationalist pride, Mexico took the first major step toward opening up its state-run energy sector to private investment on Wednesday morning when the Senate voted on an extensive petroleum reform, which has left the country divided.

After a debate that lasted more than 12 hours, the Senate voted 95 to 28 on a bill pushed by President Enrique Peña Nieto that will open Petróleos Mexicanos (Pemex) to both Mexican and foreign investors. Peña Nieto’s ruling Institutional Revolutionary Party (PRI) was able to win the support of the Green Ecological Party (PVEM) and the conservative National Action Party (PAN) to get the legislation passed.

The bill now goes to the Chamber of Deputies, where the PRI and its allies also hold a majority.

The leftists of the Democratic Revolutionary Party (PRD) and Workers Party (PT), which have called nationwide protests against the energy reform, accused the PRI and its partners of being “traitors to the homeland.” Some cried out during the session: “Referendum, referendum.”

Mexico’s oil sector has been under state control since President Lázaro Cárdenas nationalized the industry in 1938.

The reform proposes the modification of three articles in Mexico’s Constitution that address state ownership of the nation’s energy resources. The change is part of a large package of reforms Peña Nieto had hammered out with the country’s two major opposition parties, PAN and PRD, in December 2012 after he came to office. They also include an overhaul of the educational system and income tax restructuring. But the PRD has pulled out of the so-called Pact for Mexico alliance to protest the energy bill.

The state of Texas produces more oil than us”

While leftist lawmakers charged that Peña Nieto and the PRI want to sell off Pemex, the government insisted that Cárdenas’s doctrine will remain intact. The petroleum industry will still stay in the hands of the state, but new models will be introduced to attract private companies and major oil firms to operate independently in Mexico or form partnerships with Pemex through production- and profit-sharing, service contracts and licenses, insist PRI and PAN lawmakers.

“A contract license is the same as a concession. They are going to give away property that belongs to the oil industry,” said PRD Senator Luis Sánchez Jiménez during Tuesday’s debates.

PRI senators said that the government won’t be allowed to grant concessions for oil, gas and radioactive mineral explorations, or open the state-owned power company to private investment.

Once one of the biggest oil firms in the world, Pemex now ranks 14th in terms of production and sales. In 2012, its revenue accounted for just 11 percent of Mexico’s total GDP. The company has been plagued by faulty management, and needs funds to modernize its infrastructure, the government has said.

“The state of Texas produces more oil than us,” said PRI Senator Humberto Mayans during the debate.