Mexico has one of the most insular oil industries in the world. Only the state can own hydrocarbons and state company Petroleos Mexicanos has a monopoly on production and sales. Pemex hires oil service companies to provide equipment and manage oil fields for a fee, but doesn't offer them a stake in oil production.
The energy reform aims to make these service contracts more attractive by allowing Pemex to offer incentives. These include bonuses when contractors finish projects ahead of schedule and reduce costs by applying new technologies. It also allows Pemex to award additional compensation when a project is more successful than originally anticipated.
The Senate is expected to vote on the reform bills as early as this week.
The reform gives Pemex more autonomy to adjust its yearly budgets to take into account fluctuating prices for raw materials. The reform will also gradually allow Pemex to retain windfall oil revenue to invest in operations.
Author: Ksenia Kochneva
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Energy Reform in Mexico
Experts say the reform which allows state company Petroleos Mexicanos to offer oil service companies some incentives is going to be a real boon for the industry
