New laws passed last week in Mexico aim to transform the country’s energy industry by opening up the Mexican oil industry to private contracts. The changes are hoped to bring billions in investment.
Under the new laws approved by Mexico’s Congress Aug. 6 private oil contracts will be awarded in Mexico for the first time since 1938.
According to BBC News, the new laws will open the market to overseas oil firms. State-owned energy company Pemex will therefore lose the monopoly it has on the market.
Th first oil contracts will be awarded in 2015.
Mexican President Enrique Pena Nieto, who has made energy progress a top priority during his presidential tenure, said he expects that it will cause energy production to improve to the pre-recession levels of 2004 by 2025.
The Mexican oil industry has seen a downturn in production from 3.6 million barrels a day in 2004 to 2.5 million today.
The changes to the industry and the effective ending of Pemex’s 75-year monopoly required changes to the Mexican constitution, which was reformed last year. The reforms also authorize the private production of electricity.
The changes are projected to bring billions in investment to Mexico, which is the ninth-largest oil producer in the world.
Pemex, which is known officially as Petroleos Mexicanos, will now be up against global energy companies like BP, Exxon Mobile and Chevron.
Bidders will start signing contracts in the country beginning in 2015, intending to produce, explore and refine oil.
Before the reforms, bidders were only allowed to do business with Pemex.
The liberalization of the Mexican economy began in the early 1980s but did not see much progress until the recent antitrust reforms broke up the oil industry.
In July, the reform legislation broke up America Movil, the telecom company of media mogul and billionaire Carlos Slim. America Movil was the biggest telecom company in Latin America.
The reforms also include a provision to transfer around one-third of the state oil company’s pension debts to the federal government. Those against the bill said taxpayers will have to pay for the years of mismanagement in the pension fund. Yet, the majority still supported the bills, with the Senate voting 78 to 26 in favor of the energy overhaul.
The leftist opposition to the reform said the bills will privatize Pemex, which is the country’s main source of tax revenue.
