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Mexican President Signs Landmark Energy Reform into Law

Mexican President Enrique Pena Nieto, center, Senate leader Raul Cervantes Andrade, left, and House Speaker Jose Gonzalez Morfin hold up signed documents at a ceremony to mark the signing of a historic energy reform bill, at the National Palace in Mexico City, Aug. 11, 2014.
Mexican President Enrique Pena Nieto, center, Senate leader Raul Cervantes Andrade, left, and House Speaker Jose Gonzalez Morfin hold up signed documents at a ceremony to mark the signing of a historic energy reform bill, at the National Palace in Mexico City, Aug. 11, 2014.
Reuters

Mexican President Enrique Pena Nieto on Monday signed a package of laws that will serve as a rule book for comprehensive energy reform designed to lure billions of dollars in investment to the country's ailing oil, gas and electricity sectors.

Pena Nieto has made the energy overhaul the top economic priority of his administration, which aims to boost slumping growth in the world's 15th biggest economy.

He said at a ceremony at the national palace that the energy ministry will announce two next steps in the reform later this week. A so-called Round Zero allocation of oil and gas fields that Pemex will keep is to be unveiled on Wednesday.

The energy ministry will also announce which fields will be put up for grabs for foreign and private oil companies in the first round of public tenders, expected to take place next year.

The reform ends the decades-long monopoly enjoyed by Mexico's two state-owned energy behemoths, national oil company Pemex and electricity utility CFE. It opens up new opportunities for investment across the industry.

International oil majors like Royal Dutch Shell and ExxonMobil have been monitoring the legislative process and are widely expected to compete for newly established development contracts and licenses as early as next year.

“Mexico has created a solid framework to make the energy sector more competitive and attractive to private investment,” said Shell Mexico President Alberto De La Fuente in an emailed response to questions.

“We will review strategic opportunities in Mexico that could generate value for both our company and the country,” he added.

Patrick McGinn, a spokesman for ExxonMobil's upstream division, said the company welcomes the reform but emphasized that future projects in Mexico will have to compete.

“We will pursue potential investment opportunities in Mexico that are competitive with other opportunities around the world,” he said.

Credit Suisse said in a report issued Monday that the accelerated timeline announced by Pena Nieto “should bring more [investment] interest” to the sector.

The bank's research unit added that oil companies will “be able to choose from a wide array of options and analyze them with enough lead time, increasing the likelihood that the formal biddings are carried out in a timely manner.” 

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