Sunday, December 15, 2013

Mexico: One Step Closer to Amending the Constitution

Mexico is just a few state assembly votes away from making a major overhaul to its constitution aimed at reforming its energy policy.  Mexican lawmakers have amended Mexico's constitution to permit foreign firms to engage in production sharing contracts.

From Adam Williams, Eric Martin and Nacha Cattan at Bloomberg:
Mexico will end 75 years of government control of its vast oil reserves after Congress approved the nation’s most significant economic reform since the North American Free Trade Agreement.
The bill secured the required two-thirds majority in a 353-134 vote in Mexico City’s lower house today after challenges to articles were rejected. Before becoming law, the proposal must be ratified by state assemblies, the majority of which are controlled by the party alliance backing the reform. 
Producers will be offered production-sharing contracts or licenses where they get to own the pumped oil and will be allowed to log crude reserves for accounting purposes. The reform could increase foreign investment by as much as $15 billion annually and boost potential economic growth by half a percentage point, JPMorgan Chase & Co. said in a Nov. 28 report.
I am 100% certain there is no end to government control but the legislation, once fully passed and approved, will be significant.  I think Mexico is in good position to benefit not just from deep-water technology but also from horizontal drilling and fracking technology which have increased US oil production to a 20-year high.  I also wonder how this might affect immigration as new high paying oil field jobs become available in Mexico.

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