The reform of Mexico’s oil industry in December 2013 is seen as a landmark event, ending 75 years of the PEMEX monopoly and opening up one of the world’s largest unexplored areas for development by foreign E&P firms. The Mexican NOC Petroleos Mexicanos (PEMEX) has struggled for the past two decades with ageing fields, declining production and an inability to develop new fields through either lack of technology or lack of investment – PEMEX reportedly funds a third of the federal budget at present. However, production is down 25% since the peak in 2004 of 3.3 million bpd, and at a time when oil prices have been at an all-time sustained high.
Who stands to gain from oil industry reform in Mexico? – undoubtedly Mexico itself as increased E&P activity attracts foreign capital and creates jobs. From a technology and services perspective however, the highlights are surely the potential for deepwater drilling and production and also the development of the country’s sizable shale formations. The first to benefit are likely to be rig owners, drilling services companies and engineering houses focusing on front-end engineering and design. However, don’t expect an overnight boom: the first licenses under the new bill are expected to be awarded late 2015 at the earliest. The impact on the oilfield services sector is likely 24-36 months away. Whether Mexico will see the projected volumes (4 million bpd by 2025) of production is to be seen, but the energy sector reform in the country is surely the most significant upstream development in the Americas since the US shale boom and Brazilian pre-salt discoveries.
Steve Robertson, Douglas-Westwood London
+44 1795 594734 or [email protected]
