Perspectives

Mexican energy reform

Opportunity knocks

Mexico’s new energy reform ends 75 years of state monopoly in the local oil and gas sector. It is meant to attract private capital and technical expertise to build the Mexican energy industry, maximize O&G revenue, and boost economic growth through 2025.

Mexican energy reform: Opportunity knocks

Mexico has large and potentially accessible oil and gas resources, and is also known for one of the largest, yet currently untapped reserves. Petroleos Mexicanos (Pemex), Mexico's state-owned energy company, estimates that there are 29 billion barrels of oil equivalent (BBOE) in conventional and deepwater and another 60 BBOE in shale. However, Mexico's oil production has declined 25 percent to 2.5 million barrels per day (bbl/d) from a peak of 3.3 million bbl/d in 2004. Mexican oil exports have dwindled, and the country has also become a significant importer of natural gas and petroleum products. In the recent past, the Mexican government has attempted incremental reforms to its energy market. For example, in 2008, Pemex gained more flexibility in its procurement process and allowed incentives for upstream service contracts based on contractor performance. Even with these modest changes, overall oil production continued to decline.

Companies will need to strike a balance between being bold and prudent. Whether you are Pemex, a supermajor, an independent, an NOC, or oil field service company, there are opportunities for all. You just need to understand what your competitive advantage is, find the play (and partner), plan and organize, and then execute. The new Mexico should be a rewarding and interesting place to do business!

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