Maya,” the researchers say, adding the Mayan share eventually will decline.
The Deutsche Bank researchers note a “very important
difference” between markets for light and heavy crudes in
“While the light market is disengaging from the global market and the pricing dynamics will largely be determined with the ‘bubble,’ heavy and medium-sour crudes
remain fully engaged with the global market because the
US will continue to import large amounts of those grades,”
Approach seen helping proposal
for Mexican energy reform
A middle-ground approach that leaves details to legislation
improves chances the Mexican Congress will pass constitutional amendments reforming the state-centered hydrocarbon regime.
Jose Valera, Mayer Brown partner, global energy, de-
scribes the Aug. 12 reform proposal by Mexican President
Enrique Pena Nieto like this (OGJ Online, Aug. 13, 2013):
“What he does is clean the slate.”
At a Mayer Brown seminar, Valera explained the proposal
returns crucial parts of the constitution to language written
after nationalization of the oil industry in 1938, deleting re-
strictions enacted legislatively since then.
If Congress passes Pena Nieto’s proposal, the constitution
will make three key points, Valera said:
• Hydrocarbons in place belong to the state.
• The government will grant no concessions—in the
strict sense of the term in which resource ownership changes hands.
• Congress should set energy policy and determine terms
of participation by investors in oil and gas activity.
Valera said elimination of restrictions in Pena Nieto’s proposal extends beyond exploration and production to those
now applying to refining and other oil and gas operations.
Dallas Parker, cohead of Mayer Brown’s Global Oil and
Gas Practice, praised the proposal as “a stroke of genius”
because of the way it focuses on constitutional reform and
leaves details to later legislation.
Constitutional changes require assent by two-thirds votes
in both houses of Congress, he explained. Enabling laws require majority votes.
“Details are likely to be a bit more controversial” than basic constitutional reforms, he said.
Duncan Wood, director of the Mexico Institute at the Wood-row Wilson International Center for Scholars, pointed out
that Pena Nieto’s initiative followed and is less ambitious
than a reform proposal by the opposition National Action
Party (PAN) (OGJ Online, Aug. 12, 2013). It preceded and
is more ambitious than a proposal by liberal Party of the
Democratic Revolution (PRD), which would reform state-owned Petroleos Mexicanos (Pemex) but leave the government firmly in control of hydrocarbon activity.
In oil and gas, the proposal by Pena Nieto, who leads the
Institutional Revolutionary Party (PRI), would:
• Allow Pemex to enter “profit-sharing” contracts with
private and foreign oil firms.
• Cut the government’s claim on Pemex revenue, now so
high the company is unprofitable.
• Reorganize Pemex into upstream and downstream di-visions.
• Improve Pemex transparency and accountability.
• Set a national content requirement.
The proposal also would restructure the electricity industry.
Together, PRI and PAN control enough votes to assure
passage of constitutional reform.
Important questions that would be left to secondary legislation, Wood said, are whether participation terms will extend to production-sharing or be limited to profit-sharing.
Although the government now is discussing only the latter,
Congress could allow production-sharing arrangements under wording of the proposal.
Another question is whether the government would allow
non-Mexican oil and gas companies to book reserves, now
explicitly prohibited. He said the government understands
the need to allow reserves-booking.
Other open questions are rates of taxes and royalties, the
national-content percentage, and the entity that would regulate terms of participation.
Wood said use by the Pena Nieto proposal of wording
in constitutional provisions adopted in 1940 will help over-
come political resistance in a country where “privatization is
still a dirty word.”
Protests organized by PRD representatives opposing the
Pena Nieto reforms have fizzled, he added.
If Congress acts according to government plans, he said,
it will approve the constitutional changes this fall. The government then would present secondary laws for approval
late this year and early in 2014.
The first profit-sharing contracts under a new system
could be issued for bidding in the second half of next year,