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Mexican oil-gas reform at crossroads

Monday, March 21, 2016


Mexican president Enrique Peña Nieto may have received a “global lifetime achievement” award, the oil industry’s equivalent of the Oscars, as part of the IHS CERAweek Energy Conference, held last month in Houston.

But in Mexico, doubts persist over a plan to make the country’s oil sector productive, by attracting international companies with specialized skills to develop potentially significant deepwater resources.

An auction for major offshore blocks will be held in December.

Meanwhile, auctions held last year for the right to exploit conventional blocks attracted little outside interest, partly because of low international prices, but also because of oil-sector legislation which tends to discourage foreign investors, including a rule which says that only a Mexican court can resolve a dispute between a foreign company and the government.

Most countries accept international arbitration as a conflict-resolution mechanism.

State-owned Pemex in theory could explore potential new resources and – if it found any – exploit them.

But neither the Peña Nieto administration nor any private investor has been willing to fund Pemex, which has no resources, with which to develop new properties.

Mexico’s oil-gas sector in 2015 was opened to private investment – local or foreign – following a 77-year state monopoly.

During the last decade, oil production from conventional Mexican sources fell from 4 million barrels a day to 2.5 million barrels.