UPDATE 1-Mexico to propose constitutional energy reform in August -top lawmaker
MEXICO CITY, July 24 (Reuters) - Mexican President Enrique Pena Nieto will present an energy reform to Congress in August that proposes changing the constitution to encourage major new private investment in the oil sector, a senior lawmaker said on Wednesday.
Pena Nieto favors an overhaul of country's closed energy industry to lure private capital and boost flagging oil and gas production.
David Penchyna, leader of the Senate's energy committee and a member of Pena Nieto's Institutional Revolutionary Party (PRI), said the proposal will seek to change the constitution to allow either concessions or risk-sharing contracts.
"We will have President Pena's initiative in August," said Penchyna. "We do believe that the initiative will have to contain constitutional changes," he added.
Penchyna said he favors allowing concessions over production-sharing contracts.
"I think concessions have many advantages. They are the world's best proven model to provide an opening," he said.
Penchyna declined to specify which articles of the constitution the proposal will target. Articles 25, 27 and 28 govern the state's right to own, explore, produce, and commercialize the country's hydrocarbons.
Lawmakers say they are likely to feature in the reform, which Penchyna said will be presented first to the Senate.
Though state oil and gas monopoly Pemex is allowed to contract out to third-parties for a wide variety of oilfield services, payment for work as a percentage of production or profits is strictly prohibited by the existing legal framework.
Changing the constitution requires a two-thirds majority vote in Congress, and well as ratification by half of Mexico's 31 states. Analysts expect the reform to pass with support from the conservative National Action Party, or PAN.
Penchyna's comments track closely the market-friendly reform outline offered last week by the PAN, which specifically called for permitting concessions.
The PAN's reform bill is expected by July 31.
The centrist PRI is "absolutely" united behind constitutional energy reform, Penchyna said, while the leftist Party of the Democratic Revolution, or PRD, is opposed.
"My prediction is that the PRD will not go with any scenario that opens" the country's oil industry to greater private participation, said Penchyna.
Mexico nationalized its energy industry in 1938 and it remains a symbol of national pride.
In recent years, the country has seen its crude output slide by about a quarter since hitting peak production of 3.4 million barrels per day in 2004, even as Pemex has grown into one of the world's largest non-listed companies.