THE DOORS for foreign investment in to Mexico’s oil and gas market could soon open further thanks to the introduction of energy reforms, the US Energy Information Administration (EIA) has predicted.
The new legislation has prompted the government-operated research firm to revise its expectations for growth in Mexico’s oil production, indicating that the reforms would likely improve the long-term outlook for growth in Mexico’s petroleum and other liquids production industry.
The EIA said the energy reforms signed into law by Mexico’s president Enrique Pena Nieto, effectively ended the 75-year-old monopoly of state-owned Petróleos Mexicanos (Pemex).
Since 2008, the contract structure for any private company partnering with Pemex was a performance-based service contract, which offered financial incentives to private contractors working in Mexico’s upstream sector.
Mexico’s legislation introduced three new contract types that will provide more opportunity for foreign investment in its energy sector, including profit-sharing contracts and production-sharing contracts.
“The production-sharing contracts and licenses will effectively allow foreign companies to account for reserves, which is a particularly attractive incentive for investment in Mexico’s energy sector,” the EIA said.
While EIA cautioned there were many details that still needed to be bedded down before the reforms could take effect, it said the changes in its assessments of Mexico’s liquids production profile were profound.
Last year’s International Energy Outlook (IEO) projected that Mexico’s production would continue to decline from 3 million barrels per day (MMbbl/d) in 2010 to 1.8 MMbb/d in 2025.
The forthcoming outlook, which assumes some success in implementing the new reforms, projects Mexico’s production could stabilise at 2.9 MMbbl/d through 2020 and then rise to 3.7 MMbbl/d by 2040—about 75 per cent higher than in last year’s outlook.
Analysis in EIA’s upcoming IEO will include the potential effects on upstream oil exploration and production and the potential for foreign participation.