Bloomberg News

Mexico Parties in Final Phase of Energy Bill Negotiations (1)

April 25, 2014

Mexico’s two biggest parties reached agreement on key points of legislation needed to implement an energy overhaul that will end a more than seven-decade state oil monopoly, top party negotiators said.

While the ruling Institutional Revolutionary Party, or PRI, and the National Action Party, or PAN, are working out details, such as how much autonomy regulators will be granted, negotiations are in the “final phase,” said Juan Molinar Horcasitas, who runs the PAN’s political policy body.

David Penchyna, a PRI lawmaker who heads the Senate’s energy committee, said the oil proposal the federal government sends to Congress next week will be welcomed by the opposition as “a very good initiative,” declining to elaborate on contents of the bill. It will be presented before April 30, the last day of Congress’ spring session, he said by telephone.

President Enrique Pena Nieto pushed through a groundbreaking oil law last year in a bid to attract producers from Exxon Mobil Corp. (XOM:US) to Chevron Corp. (CVX:US) to drill in Mexico. So-called secondary oil bills are needed for the law to take effect. The ruling party is planning to hold special congressional sessions to vote on the bills before September to prevent delays in the government’s time line and be able to offer private drilling contracts by early next year.

Main Obstacles

The main obstacles to passing those bills are differences over separate legislation to boost transparency during elections, which has been held up in Congress by conflicts over how a new electoral institute will operate, Molinar said.

Penchyna said senators of his party are making an effort to reach common ground with the PAN on the electoral bill.

“We’re working to the limit of our capacity, making the most of our efforts to make sure the political reform is approved in this ordinary session,” Penchyna said.

The oil overhaul will boost annual foreign investment by as much as $20 billion in 2015, according to Bank of America Corp.

Molinar said that while parties haven’t reached an accord on national content requirements to incorporate Mexican firms into oil drilling projects, the differences “aren’t a deal-breaker.”

PAN members want national content levels determined for individual contracts rather than as a minimum set in the secondary laws, Molinar said. More important than national content are disagreements over the level of autonomy granted to oil-sector regulators, Molinar said. The PAN wants regulators to be autonomous from the Energy Ministry, he said.

Penchyna said the PRI is merely following the guidance set by the constitutional amendment passed last year to break the oil monopoly.

“It’s a coordinated organ with the Energy Ministry,” Penchyna said. “It’s not an autonomous body, but will have budgetary and technical autonomy.”

To contact the reporters on this story: Nacha Cattan in Mexico City at ncattan@bloomberg.net; Carlos Manuel Rodriguez in Mexico City at carlosmr@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Andre Soliani at asoliani@bloomberg.net Bill Faries


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