MEXICO CITY (AP) — Mexico's Senate on Wednesday approved the most dramatic oil reform in decades, moving the country closer to opening its beleaguered, state-run sector to private companies and investment.
The Senate voted overwhelmingly in favor of allowing the government to grant contracts and licenses for exploration and extraction of oil and gas to multinational firms, something currently prohibited under Mexico's constitution.
Contracts could be made directly with the state rather than issued by the state-run oil company, Petroleos Mexicanos, ending its monopoly on Mexican oil. The reform allows contracts for profit- and production-sharing, as well as licenses, in which companies pay royalties and taxes to the Mexican government for the right to explore and drill.
The reform gives private companies the ability to post expected benefits in their financial statements, as long as they specify in their contracts that all oil and gas they find in the ground belongs to Mexico, according to articles expanding on the reform.
The constitution would continue to prohibit oil concessions, considered the most liberal kind of access by private oil companies.
The bill still must be approved by the lower house of Congress and 17 of Mexico's 31 states and Federal District. It's the crowning piece of President Enrique Pena Nieto's first year of reforms, which have also targeted education, the tax system and telecommunications.
But energy reform is considered most crucial to the overall economy and the remaining five years of Pena Nieto's presidency.
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