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Mexico Passes Historic Reform,Opens Energy Sector to Outside Investment

16 December, 2013

Government senate and congress members passed a sweeping energy reform bill Monday that will open up the nation’s substantial oil and gas industry to outside investment and end a 75-year state monopoly. Mexican lawmakers have been finalizing plans for the ambitious reforms in recent months and will attract a large amount of new foreign investment dollars with the bill’s passing.

Following senate approval late last week,17 of 31 states voted in favor of the bill today,which has been expected to pass due to the fact that President Enrique Peña Nieto’s Institutional Revolutionary Party (PRI) is currently in control of most state governments. Nieto has made no secret since his election in 2012 of his plans to reform the nation’s state run oil giant Petroleos Mexicanos (PEMEX).

“This shows that Mexico has solid democratic institutions,capable of carrying forth major national transformations,” stated Peña Nieto via Twitter.

Specifically,the new law will permit production sharing agreements that allow private firms to take a cut of the crude they find,and will also open up Mexico’s electricity sector. Both of these initiatives are expected to help Mexico become a world leader in energy production,thanks to its large deep-water oil reserves and shale rock deposits of natural gas. 

“It is hard to overstate the significance of the reform,which throws the door open to a return of the likes of ExxonMobil and Royal Dutch Shell to the world’s 10th biggest oil producer,” writes the Financial Times. “Marco Oviedo at Barclays said investment in the sector could swell to 3.5 percent of gross domestic product in the coming years.” 

According to the Wall Street Journal,the initiative is expected to attract more than $10 billion in foreign investment money in the near future,which will add to the current North American energy boom and help lower costs for businesses throughout the entire region. Under contract with the state,foreign companies will now be permitted to locate and produce oil and natural gas,and will also now be allowed to open and operate gas stations throughout Mexico.

“The first tenders for exploration could be ready by next year,” writes the Wall Street Journal. “Mexico,especially the deep waters of the Gulf,represents the largest unexplored oil patch outside the Arctic Circle.”

The Mexican government hopes to increase production by as much as four million barrels a day by 2025,adding at least 1.5 million barrels per day to the current output. 

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