The Energy Reform in Mexico 2008

Petróleos Mexicanos (PEMEX) is a pillar of Mexico’s economy; it generates approximately 35% of the government’s revenues. In 2008, PEMEX marked its 70th year of operating as the only oil company in Mexico. During the first nine months of 2008, oil production decreased 9.7%, a constant trend since 2005 and if it continues, experts estimate than within ten years, PEMEX will be in catastrophic conditions and unable to produce or refine petroleum. In order to mitigate this problem, it is necessary to explore and exploit deep sea deposits, more than 1,000 meters under sea level, for which it requires the capital to invest in machinery and technology. The government doesn’t have the necessary capital; therefore, the reform to Article 27 of the Constitution permits the participation of the private sector. Mexico’s Chamber of Deputies approved in October 2008 the seven issues of the energy reform proposed by the Federal Government, granting greater autonomy to PEMEX. This reform will provide many benefits to the country. Basically, it authorizes PEMEX to establish contracts with private companies, easing their participation in the exploration and production of oil. This new law will allow Mexican companies to participate in great infrastructure projects for PEMEX; cement, smelting, metal and metal mechanic industries will increase their activities, thus creating new jobs. This reform also presents a way to strengthen Mexico’s supply networks, reducing the risk of petroleum deficits in the future. This will increase the Federal Government’s resources, which in turn has expressed its commitment to employ these new resources in improving the life quality of all Mexicans. With the goal of using this reform exclusively for the benefit of Mexico, the new law establishes that payment to private companies hired for the exploration, exploitation and transportation of petroleum will always be done in cash and will never hand over part of the oil or its derivates. In order to keep private companies from creating monopolies and controlling national production, the law includes a clause that prohibits block contracts, so companies will never own the area being exploited. Artículo Producido por el Equipo Editorial Explorando México. Copyright Explorando México, Todos los Derechos Reservados.