Mexican Senate approves liberalisation of energy market

Credit: Oil tanker in South Portland by Justin Russell

Yesterday, Mexican Senate approved the Energy Reform over oil and electricity. Originally, the Bill presented by President Peña Nieto provided for a conservative opening of the market, as he had not enough support to pass it. However, with back up from left-centre PAN, the Senate approved a liberalisation of the market under these terms: 1. Private companies can participate into the market. Previously, there were a limited number of activities where private companies could do energy business. 2. Refining, basic petrochemicals, as well are open to private companies. Nevertheless, the State remains owner of the hydrocarbons. State will remain manager of electric grid, but private can openly enter as contractors. Nuclear will remain state-controlled. 3. There are four models approved for extraction business: Services, Profit or Production Shared Agreements and Licenses. Combined models are allowed. 4. PEMEX will compete with other players in the market. PEMEX will have right of first refusal for choosing projects, as long as it demonstrates capability. PEMEX can have partners and/or convert to an approved business model. 5. Energy market will be ruled by Comisión Reguladora de Energía and Comisión Nacional de Hidrocarburos. 6. A sovereign fund is formed for Banco de Mexico to manage profits on oil rents. Now, the Bill is passing to the House of Representatives for discussion. It is expected not to change substantially, but it has some many legal consequences that it would require a deeper review, specially on electrict generation. Do you expect more surprises?