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Private sector investment offered by Mexican oil industry

By Catholic Online (NEWS CONSORTIUM)
August 13th, 2013
Catholic Online (www.catholic.org)

A longtime source of national pride, Mexico's oil industry will now give the private sector investment opportunities. Mexico's oil industry had been previously protected from private involvement for 75 years. Mexico President Enrique Pena Nieto has now proposed reforms that to encourage both foreign and domestic investment in the industry.

LOS ANGELES, CA (Catholic Online) - Dominated by the state oil firm Pemex, Mexico's oil industry definitely needs investment and expertise to develop new oil and gas fields. At this time, private companies can only be awarded service contracts within the oil industry. Under Nieto's plan, private companies will be able to share the risks and profits of developing new fields.

Analysts say the liberalization of the oil sector could double foreign investment in Mexico. If the proposals are approved, it would give the national economy the biggest boost since the country joined North American Free Trade Agreement, or NAFTA 20 years ago.

Mexico's political leaders reiterate the reforms won't constitute privatization, as no oil concessions will be sold off.

There is a fly in the ointment: Mexico's leftist parties oppose the reform. "The reform won't be simple to get through congress," BBC Correspondent Will Grant says. "The government faces a complicated task in negotiating with all sides, including the powerful unions.

"Yet, there is a growing sense among ordinary Mexicans that Pemex is no longer fit for purpose, is an aging and out-dated institution and that root and branch reform is probably needed," he said.

Currently, a large share of Pemex's profits support government spending which has hampered the company's ability to fund new projects.

In the meantime, the government has warned that Mexico faces becoming a net oil importer as early as 2018, if major new oil projects can't be developed.

BP and Exxon Mobil, foreign oil companies are waiting to see the details of the reforms to see exactly what investments will be allowed.

Mexico is the world's 10th-biggest producer of crude, according to figures from OPEC. Production has fallen by 25 percent since hitting a peak of 3.4 million barrels daily in 2004.

Despite being a top exporter to the United States, Mexico still has to import nearly half of its gasoline, because of a lack of refining capacity.

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