Oct. 20 (Bloomberg) -- Mexico's Senate energy committee approved the first of two bills that would allow the state oil monopoly to hire domestic and foreign companies for exploration and production under contracts with performance-based incentives.

The two bills, if approved on the floor of the Senate and lower house, would let companies receive bonuses for finding more oil, reaching production goals, using new technology or reducing costs. The companies would only be paid in cash and wouldn't be allowed to own Mexican oil or book reserves. The committee plans to vote on the second bill later today.

The committee also rejected a proposal by the opposition Party of the Democratic Revolution that would have prohibited the company, known as Pemex, from hiring contractors to explore or drill for oil in multiple areas.

To contact the reporter on this story: Jens Erik Gould in Mexico City at jgould9@bloomberg.net.

Last Updated: October 20, 2008 17:09 EDT