President Enrique Peña Nieto proposes allowing foreign companies to invest in Pemex.
Mexico President Enrique Peňa Nieto has proposed allowing foreign companies to investin its state-owned oil company Petroleos Mexicanos or Pemex.
While the President said Pemex will not be sold or privatized, this historic energy reform proposal would, for the first time, allow foreign investors to engage in profit-sharing in Mexico’s energy sector.
Mexico relies on Pemex for about a third of the government’s income but the company has been notoriously inefficient and corrupt.
Oil production has continued to drop for almost a decade. Mexican Energy Minister Pedro Joaquin Coldwell says Mexico can only provide about half of the gasoline that the country consumes.
For decades Mexico found large amounts of oil easy to extract from shallow water. But now Pemex needs to go after oil in deep water, shale and other hard to reach places. And that costs more money and requires outside expertise.
To many in Mexico, owning their own petroleum has been a source of great pride since the industry was nationalized in the 1938. The proposed reform would alter two articles in the Mexican constitution, including Article 27 which states: “All natural resources in national territory are property of the nation.”
While Peňa Nieto’s reform proposal may be unpopular, it appears to have the support needed to pass both parties. The conservative party had proposed deeper reform -- privatizing Pemex completely, allowing oil giants like Exxon Mobil and Shell to participate in exploration and production in Mexico.
