The Mexican oil and gas story as of late has been plagued by misfortune and poor timing. President Nieto held high hopes when the country began the country’s energy reform and denationalized the state-run oil company, Petroleos Mexicanos (Pemex). Breaking up the national oil giant was one of the steps hoping to lead to an investment flood with companies rushing to develop Mexico’s enormous reserves. Allowing foreign oil companies to develop their domestically held assets for the first time since 1938, the plan has seen very little traction due to the simultaneous fall of oil prices.
This past week at the IHS CERAWeek Conference in Houston however, President Nieto held fast to his commitment to energy reform for Mexico. He gave a deadline of early December to open bidding for deepwater fields that the country currently owns. “Just like I committed myself to achieve the energy reform, now I am committed to accomplish its full, effective and timely implementation,” the President said. The auction has experienced continued delays and the industry has kept a wary eye on the vast treasure at Mexico’s feet. This announcement offers the firmest date and some are hopeful that the country’s energy playground may soon be open.
According to the most recent EIA findings, Mexico has upward of 10 billion barrels of proven reserves and likely more given recent discoveries. Communication between the US and Mexico is essential for the US, given that Mexico is the largest source of U.S. oil imports. The two countries have a longstanding track-record of co-operation, especially when it comes to oil and gas development. This symbiotic relationship along with the energy reform has slowed the steady decline in production occurring in Mexico since 2005 but has yet to fully turn things around.
The sale includes 10 fields, with four blocks in the Centuron Plegado Perdido region and six in the Cuenca Salina region. BP, Chevron, and Shell are a few of the major players that have showed interest in the US portion of the Perdido blocks. Both regions of oil and gas plays hope to bring around $44 billion in investment to the country, which then will be re-invested in further energy reform and independence. This will be the fourth round of resource auctions, following a bleak first round but prosperous second and third round of auctions.