Mexico's senate energy and legislative studies committees have published the first three energy reform bills in the upper house's gazette.
The bills would provide contractor incentives and aim to make state oil company Pemex's operations and finances more flexible.
The committees were scheduled to present the reform bills to the senate's general assembly on October 21, but their presentation was delayed due to voting over an economic package.
The three bills will now be presented on October 23 in conjunction with the remaining bills, which still required some final revision as of the morning of October 21, Mexican senator Graco Ramírez (PRD opposition party) told reporters.
The committees created the bills after evaluating three energy reform proposals from the major parties - PAN, PRI, and PRD - as well as another bill from the Green Party (PVEM) regarding renewable energies.
REFORMING ARTICLE 27
The first bill would reform the secondary law that regulates constitutional article 27, which regulates private sector participation in the oil sector.
It would add additional nationalistic rhetoric to the existing law, saying that Mexico has "direct dominion" of all hydrocarbons and is responsible for their production.
Likewise, it would establish in writing that all payments for service contracts must be made in cash as opposed to stakes in production or sales.
In addition, it would ban Pemex from submitting to foreign tribunals over service contracts.
Energy ministry Sener, energy regulatory CRE and the national hydrocarbons committee that would be created by the energy reform measures would have the right to suspend or terminate construction works or systems if they pose a "danger".
NEW PEMEX LAW
A second bill would reinforce much of what is written in the first, but is considerably more far-reaching.
The bill would replace Pemex's existing "organic law," which relates to the organization and administration of the state firm, and reform laws related to acquisitions, leases and services for the public sector as well as public works and services.
The bill would allow Pemex to sign contracts with incentives. Pemex could provide bonuses to service companies and modify multi-year contracts to incorporate technological advances and changes in market prices, among other factors.
Companies would be penalized for damaging the environment or failing to comply with contract terms.
The bill would give Pemex 180 days to establish a strategy to support domestic service providers and contractors. The strategy should have an end goal of at least 25% national participation.
Mexico's finance and public credit ministry (SHCP) would establish a national fund within 90 days to promote development of domestic service providers and contractors, particularly focused SMEs.
The federal spending budget would earmark 5bn pesos (US$384mn) in 2009 and 2.5bn pesos in 2010 for the fund.
The bill also would allow the state firm in some cases to invite specific companies to bid on contracts or award contracts directly.
If passed, the new law would grant Pemex more autonomy to manage its own finances.
Pemex could take on debt and, provided it does not exceed the annual amount allocated by the government, modify its budget and increase expenses based on surplus revenue without SHCP approval.
In the first year, Pemex could use either 20% of surplus revenue or 10bn pesos, whichever is larger, for investment, maintenance and operations.
If Pemex meets its annual goals, these figures would grow to 35% or 11bn pesos in 2010, 50% or 12.5bn pesos in 2011, 62.5% or 14bn pesos in 2012, 75% or 15bn pesos in 2013, 87.5% or 15bn pesos in 2014 and finally 100%.
Pemex's board would authorize the budget as well as execution of projects without SHCP intervention.
Another measure included in the new Pemex law would increase the number of board members from 11 to 15, six of whom would be designated by the country's president. Five would represent the oil workers' union (STPRM) and another four act as professional advisers.
The advisers would be appointed by the president as well but need to be ratified by the senate. They would serve six-year terms that could be extended once by an equal period.
Likewise, the bill would create new committees for the state firm. Pemex committees would include: audit and performance evaluation; strategy and investments; salaries; acquisitions, leases, works and services; environment and sustainable development; transparency and accountability; and technological R&D.
The bill would allow Pemex to issue so-called citizen bonds, which would be available to Mexican retirement funds, investment funds for individuals, pension funds and other financial institutions, excluding brokerage houses.
The bonds would be tied to Pemex's performance and not grant holders any decision-making ability within the firm.
SHCP would determine regulations for the bonds, including the form in which they would be acquired and ways to ensure individuals hold no more than 0.1% of the total value of bonds issued.
CRE LAW
The third bill aims to strengthen CRE by giving it more autonomy and regulatory capacity.
CRE, for example, would be allowed to issue terms and conditions for the energy sector rather than just approve them.
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