Mexico was the world's sixth biggest oil producer in 2006
Mexican President Felipe Calderon has called on the country's Congress to approve an energy reform bill to overhaul state oil giant Pemex.
Mr Calderon said the plan would give Pemex more freedom to manage its budget and contract out work, so boosting both oil production and exploration.
Mexico's known oil reserves are running out and production has been falling.
Mr Calderon stressed the bill would not privatise Pemex, a national symbol that has been in state hands since 1938.
"To strengthen Pemex is to strengthen Mexico," President Calderon said.
"We must act now, because time and oil is running out."
Oil revenues constitute some 40% of federal income, but production has been falling.
Pemex officials say they badly need the technology and resources to explore for more crude oil in the deep waters of the Gulf of Mexico.
President Calderon said the proposed reforms would give Petroleos Mexicanos more autonomy to hire specialist firms to build and operate refineries.
The proposals also include giving Pemex more freedom to make decisions, contract out work, and manage its budget to reinvest in production and exploration.
Mr Calderon also outlined proposals to allow Pemex to issue "citizens' bonds", allowing Mexicans to invest in the company.
Mr Calderon's address came amid a fierce debate over the future of Pemex, which is marking 70 years in state hands.
"I want to make clear that oil is and will continue to be exclusively Mexican property. Pemex is not being privatised. Oil is a symbol of the nation's sovereignty," he said.
The reform presented to Congress has, however, been watered down after months of argument.
Pemex's future is a highly sensitive issue in Mexico
Mexico's constitution stipulates that the oil industry must remain under state control and suggestions of allowing more private involvement have provoked a strong reaction among some sectors.
Defeated presidential candidate Andres Manuel Lopez Obrador and his supporters have already held rallies to protest against any plans to open up Pemex to outside involvement.
Pemex's proven oil and gas reserves fell for the sixth consecutive year in 2007.
Mexico was the world's sixth biggest oil producer in 2006 but production has been declining, particularly in its offshore field, Cantarell, that has yielded some 60% of the country's oil.