Oil
Mexico nears energy bill, oil to remain in state hands
TORONTO – Mexican senators on Friday neared agreement on a bill that would allow private investors to drill for oil and market the country’s black gold, but keep ownership of the crude in state hands.
The draft bill breaks with 75 years of tradition in Mexico, where the 1938 expropriation of foreign oil companies helped to forge its modern self-image, and President Enrique Pena Nieto aims to pass his most ambitious reform before Christmas.
But mindful of the resistance it faces on the left against opening up the oil industry, the government has sought to tread carefully, stressing that it will not put ownership of the country’s oil wealth in private hands.
A deal hinges on talks between Pena Nieto’s Institutional Revolutionary Party (PRI) and the conservative National Action Party (PAN), which had espoused a more radical vision of reform for the oil industry, including offering concessions to private operators, a line the PRI will not cross.
Jorge Lavalle, a senior PAN energy expert in the Senate, said the two sides were close to an agreement on what kind of contracts can be offered, including production-sharing deals and licenses that could give companies much more freedom.
But he said Mexico would remain the owner of the oil.
“They won’t be able to book reserves of hydrocarbons coming from Mexico because hydrocarbons are and will remain property of the nation,” Lavalle told Reuters.
Lavalle said production-sharing contracts could allow companies to be paid with oil instead of cash, but a senior PRI lawmaker, speaking on condition of anonymity, said this was not on the cards because it implies handing over the crude to outsiders.
When unveiled by Pena Nieto in August, the proposal aimed to offer only profit-sharing contracts to private investors, but the PAN and elements of the PRI argued this would not be sufficient to attract major investment to the industry.
“We are not going to tie ourselves to one model,” said Francisco Dominguez, a PAN senator who sits on the energy committee in the upper chamber of Congress.
“The PAN proposed concessions, but that creates a lot of noise. Licenses are exactly the same, and that’s what they use in different places like Brazil and Norway,” he added.
Instead, the revised draft will give companies scope to operate across the industry, in the hope the shake-up will reverse nearly a decade of declining production, lawmakers said.
IRONING OUT DIFFERENCES
The reform would allow private companies to form partnerships with state oil monopoly Pemex, which was created after the 1938 expropriation.
PRI lawmakers said the bill was likely to allow private companies to market the oil, but stressed that the commodity would still remain under the ownership of Mexico.
The reform, one of a series of measures Pena Nieto has unveiled to ramp up growth in Latin America’s no. 2 economy, aims to change the constitution to make new types of contracts possible.
For that, the government needs to secure two-thirds of the votes in Congress, but the PRI does not even have a simple majority and needs PAN support to pass the bill.
PRI Senators had aimed to present the draft bill early on Friday but the plan was delayed until the weekend to give time for the two sides to hammer out a consensus.
The party has been at loggerheads with the PAN over details of the reform, such as how to manage a planned sovereign wealth fund to be created from oil revenues.
While the PRI wants to make sure the Finance Ministry oversees the fund, the PAN wants an autonomous body.
PROTESTS
Outside the Senate in downtown Mexico City, hundreds of federal police stood guard as scattered groups of protesters held speeches against the energy bill in front of a huge cordon of metal barricades erected to protect the building.
Graffiti, posters and banners plastered on the barricades denounced the energy bill as a national betrayal, invoking symbols of the left and heroes of Mexico’s pre-Hispanic past.
One spray-painted image depicted a grinning Pena Nieto, his trousers around his ankles and the words “Pemex is not for sale” written across his bare buttocks.
“Private companies aren’t going to want to share their winnings with Mexico,” said small business owner David Pacheco, 51. “The capital always ends up taking flight.”
Crude output at Pemex has fallen by a quarter since peaking at 3.4 million barrels per day in 2004, and its management says it needs a huge injection of capital.
However, many Mexicans believe the plan is a covert bid to sell off the company, which despite a string of corruption scandals over the years has remained a potent national symbol.
Franco Quadros, 61, said he would camp outside the Senate all night to protest. The bill could lead to the kind of privatization that helped make Carlos Slim the world’s richest man after he bought state phone monopoly Telmex two decades ago, he said.
Officials said senators should unveil the draft bill at the weekend and that they still hope to pass it as soon as next week.
– REUTERS
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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