25 October 2008

Senate votes for reform

AMLO addresses followers at November 2007 rally.

Senate votes for reform

The News

The Senate approved an energy reform package Thursday, six months after President Felipe Calderón unveiled his controversial plan for overhauling the state-run petroleum sector and stemming a precipitous decline in oil production.

Lawmakers from the three main parties voted overwhelmingly in favor of the seven initiatives comprising the package, which now moves to the Chamber of Deputies.

"It's a success that we've had a civilized Senate debate, producing new rules of the game for a better, more modern and more transparent Pemex," said Sen. Manlio Fabio Beltrones, leader of the Institutional Revolutionary Party, or PRI, in the Senate.

The vote was moved from the Senate chamber to a heavily guarded office tower several blocks away in order to avoid protesters loyal to former presidential candidate Andrés Manuel López Obrador, who has long decried the plan as a first step to privatizing the nation's oil industry.

But López Obrador's protests, which included a takeover of Congress earlier this year and regular street demonstrations by his "oil defense brigades," lost some of their steam after members of his same Democratic Revolution Party, or PRD, opted to negotiate the deal with the PRI and Calderón's National Action Party, or PAN.

The initiatives approved Thursday grant Pemex increased budgetary and operational autonomy; allow the state-owned oil giant to partner with private firms for oil exploration and exploitation ventures; make the company's tendering process more flexible and provide incentives to restart dormant drilling activity in mature oil fields.

But the reforms discarded Calderón's proposals for paying performance bonuses to Pemex's private-sector partners and eliminated another for building new refineries with private money. The reforms also failed to touch the influential oil workers union, which holds five seats on the Pemex board.

Despite the changes, Calderón lauded the Senate-approved package.

"Without exaggerating, I can say that it is the most favorable change in the hydrocarbons sector since 1938," he said, referring to the year the petroleum industry was expropriated.

Analysts described the reforms as an improvement over the status quo, but inadequate for solving the managerial issues in Pemex and arresting production declines.

"This reform is important in providing Pemex with increased autonomy, both financially and operationally," said Alejandro Schtulmann, director of research at Empra, a Mexico City risk consultancy.

"But it falls short in solving Pemex's challenges. The union is a huge problem ... it won't do anything to reverse the decline of [the massive Cantarell oil field.]"

The vote followed six months of discord over energy reform, which has provoked legislative shutdowns, more than two months of public hearings, a partisan citizen consultation process and the threat of López Obrador-sponsored brigades flooding the streets.

A small group of senators representing a coalition of left-wing parties known as the FAP voted against the reforms due to the lack of a clause explicitly forbidding future privatization. They also objected to a measure allowing private firms to win contracts for managing entire production areas on behalf of Pemex.

Deputy Javier González Garza, PRD leader in the Chamber of Deputies, said the two measures would be raised during debate in the Chamber, although he added, "I agree with a large part of the reform."

Debate in the Chamber is expected to begin Tuesday.

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