Mexico eyes end of near 80-year state ownership of oil, gas

Workers clean mud from the bit of the Centenario platform in the Mexico-controlled area of the Gulf. Centenario is a deep-water exploration rig that drills down more than 8,000 feet.
Michelle Caruso-Cabrera | CNBC

Mexico's government said on Wednesday it will give preference to local companies as it looks to attract investors and reduce the state's domination of the oil and gas industry.

Presenting its legislation to flesh out a 2013 reform that forms the core of President Enrique Pena Nieto's plan to ramp up economic growth, the government also said companies would have over a decade to meet so called so-called local content requirements.

Designed to boost domestic industries, the requirements oblige companies to use a certain amount of homegrown contractors for work, and Energy Minister Pedro Joaquin Coldwell said this quota would need to reach 25 percent by 2025.

The energy reform passed in December ends the state's 75-year-old oil and gas monopoly and aims to generate billions of dollars worth of private investment for the industry in Mexico, the world's 10th biggest producer of crude oil.

The so-called secondary laws presented on Wednesday set out rules for the implementation of the reform, and are being closely watched by oil majors such as BP and Royal Dutch Shell.

Joaquin Coldwell told a news conference all contracts for oil and gas exploration and extraction will be issued by public tender, adding that Mexican firms would take priority over foreign companies in the opening up of the market.

Standing alongside him, Finance Minister Luis Videgaray said that in accordance with the reform, the laws would cut the fiscal burden on state oil giant Pemex, which was created in 1938, to less than 65 percent on average from 79 percent.

Under the reform, the government will also reduce its involvement in the national electricity utility known as CFE.

"The time has come for the finance ministry to let go of the administration of Pemex and the CFE," Videgaray said.

Wednesday is the final day of the current session of Congress, which is not formally due to reconvene until September. The government had hoped to pass the laws in the session but disputes with the opposition delayed them.

To speed up the legislative process, Congress will call extra sessions and lawmakers hope to pass the energy laws by the end of June.

--By Reuters