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Pemex: end of a monopoly

Tuesday, December 17, 2013

For the first time in 75 years, private companies – both foreign and domestic - will be able to develop oil-gas properties in Mexico, following a decision last week by the national congress to terminate a long-standing monopoly of state-owned Petróleos Mexicanos.

Under the new rules, private companies will be able to acquire licenses, which confer the right independently to explore and develop energy sources.

Earlier versions of the new rules would have required private companies to enter into joint ventures with Pemex, a concept which may not have appealed to potential investors.

The new measures are expected to attract as much as $20 billion a year in new investment in the Mexican oil-gas sector, whose production has declined by a quarter, since its peak in 2004.

Largely operated as a cash cow for the government, Pemex has lacked the resources necessary to invest in new procedures, especially technologies for offshore drilling, as well as efficient natural-gas production.

Mexico has total hydrocarbons potential of 160 billion barrels, according to Pemex.

Proven crude reserves are around 10 billion barrels, along with 17 trillion cubic feet of gas, according to the United States Energy Information Administration.