Mexico's Oil and Gas Reserves
Mexico Oil and Gas Dynamic
"Mexico has undertaken very little activity in its portion of the Gulf of Mexico, particularly compared to the US”
CRS Report, 18th November 2013
"Timing is 'pretty exquisite' in terms of investing in Mexico said Citigroup Head Commodities Researcher Ed Morse”
Capitol Report, 7th July 2014
Mexico’s oil production has declined by almost 20% over the last decade due, in part, to ageing and inefficient infrastructure.
Oil production, consumption & exports – 2002-2012
There are potentially significant deep water resources in the Gulf of Mexico. There has been very little activity in Mexico’s portion of the Gulf compared to the US, partly due to lack of technical capacity to effectively explore or produce from deep water areas.
The prolific Eagle Ford Shale formation in the US extends into Mexico. This formation produces natural gas, condensate, oil, and natural gas liquids, with margins more favourable than other shale plays.
The Eagle Ford Shale is largely under-exploited in Mexico – undercapitalisation has meant Pemex has been unable to implement new successful technologies to recover ‘tight oil,’ especially the vast amounts of oil and gas locked in shale fields in places like the Eagle Ford.
According to BBVA Compass, the portion of the Eagle Ford Shale formation that extends into Mexico is part of the Burgos Basin, which at 343TCF is estimated to hold two thirds of Mexico’s technically recoverable shale gas resources with the Sabinas, Tampico and Veracruz basins accounting for most of the remainder.
Mexican Energy Reforms
For the first time since nationalisation in 1938, Mexico’s oil and gas industry is primed for foreign investment. Following the 2013 legislation the oil and gas industry is open to private companies, via cash, profit-sharing and production contracts alongside the state-owned oil company, Pemex.
Pemex’s heavy fiscal burden has been reduced, enabling it to partner with international companies with the experience and capital required to explore Mexico’s vast deep water and shale resources.
The deadline for Mexico’s Energy Ministry to determine which fields Pemex will retain in the first round of non-competitive bidding “round zero” is September 2014. From this date onwards, private companies will be permitted to undertake midstream and downstream activities in Mexico.
New Energy Reforms
"Mexico’s Congress has approved a bill to end a 75-year state oil monopoly which could generate as much as US$20 billion in additional foreign investment a year"
Invesco Perpetual Emerging Markets review, 7 January 2014
"To develop to the maximum the resource potential of this country will require investment of more than US$60bn a year."
Pemex, March 2014
- Four oil and gas exploration and production contract models: service contracts, production-sharing, profit-sharing, and licences
- Pemex has first refusal on developing Mexican resources before private companies are allowed to bid ‘round zero’ - Pemex to provide financial and technical plans to develop the resources within three years
- Oil and gas sectors regulated by the Energy Regulatory Commission, the Secretary of Energy, and the National Hydrocarbon Commission, new National Agency of Industrial Safety and Environmental Protection created
- Pemex remains state-owned but given more administrative and budgetary autonomy - Pemex allowed to bid with other companies on new projects
- Establish the Mexican Petroleum Fund to manage contract payments and oil revenue.