Mexico needs new laws for private oil industry(2)

Oil, second page. 

The reform has caused political tension. The two left-wing parties in Congress, the Party of the Democratic Revolution and the National Renewal Movement, are opposed to it on the argument that it privatizes Pemex and hands over the country’s oil to foreign companies.

Both parties say they will bring legal challenges against the reform and organize a referendum in 2015, based on the federal law on popular consultations passed Dec. 11, 2013. 

The reform was voted 95 to 28 in the Senate and 354 to 134 in the lower house.

It was supported by the two traditional forces, the Institutional Revolutionary Party and the opposition National Action Party, along with two smaller parties, Ecological Green and New Alliance.

The government said output of crude would rise from the current 2.5 million barrels per day to three million by 2018 and 3.5 million by 2025, while natural gas production would go up from 5.7 billion cubic feet a day to 8.0 billion by 2018 and 10.4 billion by 2025.

It also projected a one percent rise in GDP by 2018 and a two percent increase by 2025, while promising that 500,000 new jobs would be created in the next four years and 2.5 million over the next 11 years.

The areas where new regulations would be needed are exploration and exploitation of wells deeper than 1,500 meters and shale gas fields, which Pemex has been working on since 2010 with scant results.

After the April 2010 Deepwater Horizon oil spill in the Gulf of Mexico, the National Hydrocarbons Commission (CNH), implemented new industrial safety provisions for deepwater drilling, to prevent such accidents.

The regulations include the assessment of contingency plans and a requirement of accident insurance. But the reform involves a revision of the provisions, so that they also apply to private companies.

“It’s not clear that the state will be more rigorous with Pemex than it could be with private companies. Is it more likely that they will come down hard on Pemex or on Exxon?” Tronco asked rhetorically.

“Do we have the capacity to administer justice in either one of the spheres, public enterprises or private companies? If we don’t, we have to start to build it,” he said.

The U.S. government does not fully implement the new industrial safety and environmental protection standards created after the 2010 disaster, Estrada said.

“We have many many examples of how the law is broken,” he argued. “How does the reform translate into public policies, budget, transparency, monitoring and oversight over the use of resources and the objectives achieved? That is the important part, to see whether these reforms will work or not.”

Greenpeace has protested the way Pemex operates in communities where the oil industry is active.

And such conflicts will be aggravated when the industry is opened to private companies, Estrada said.

The reform creates the National Industrial Safety and Environmental Protection Agency, which will set industry standards. There are concerns over whether there will be overlap and duplication of efforts with the CNH, the environment ministry, and the federal environmental protection agency, PROFEPA.