Mexico’s President Enrique Pena Nieto will sign his landmark energy reform into law in the coming days after Congress gave final approval to the historic overhaul this week. The reform, that ends more than 75 years of monopolies of state-owned oil company Pemex and national power company CFE, will liberalize investment opportunities. Private investors are now lining up to place their bids and sign profit-sharing contracts. U.S. giant ExxonMobil and British rival BP are leading an “energy task force” within the American Chamber of Commerce of Mexico and others like Chevron and Royal Dutch Shell are eyeing the prize. “Today, a great step was taken for the future of Mexicans,” Pena Nieto wrote on Twitter on Wednesday (see below), adding that the reform through the reform “we will take better advantage and is a sustainable way or energy resources.” According to the Mexican government, the cost of energy will decrease, 2.5 million new jobs will be created by 2025, and GDP will increase by two points by 2025 because of the reform.
The government now plans to accelerate the timetable for inking joint ventures with private oil firms, according to Reuters. “Round Zero will be announced next week,” a senior government official told the news agency on condition of anonymity. The country has been pushing hard for the overhaul due to a steep slump in oil output in Latin America’s second largest economy. Oil production in Mexico as a whole has fallen from 3.8 million barrels per day in 2004 to 2.5 million b/d in 2013. Production of the Cantarell oil field, the most lucrative of Mexico’s shallow water reserves, peaked in 2003 at 2.1 million b/d , and is now producing less than one quarter of that, read a recently released Americas Society/Council of the Americas white paper, Mexico: An Opening for Energy Reform.
Hoy se da un gran paso para el futuro de los mexicanos. Aprovecharemos mejor y de forma sustentable nuestros recursos energéticos.
— Enrique Peña Nieto (@EPN) August 7, 2014
“Through these reforms, Mexico is taking critical steps to boost its competitiveness. We believe that Mexico will take advantage of this opportunity to deepen investment and growth, which will have far reaching effects on the Mexican economy. We look forward to our continued engagement with Mexico on these matters,” said John Negroponte, Chairman of the Council of the Americas and Former U.S. Ambassador to Mexico in a note.
The reforms in the world’s 10th biggest oil producer could bring tens of billions of dollars per year in investments, yet the process must be played out properly. The government’s auctions of its first exploration and production contracts to private companies isn’t expected to happen until the second half of next year. Time is on their side.