Mexico’s lawmakers have approved new and historic measures which will be opening the energy sector to private investment. The Mexican oil sector had previously been a state monopoly for over 75 years. Mexican President Pena Nieto made liberalization of the energy sector, among others, a central part of his platform when he became President. At present, Mexico is the world’s 9th largest oil producer.
In the next 6 months, details of the tenders will be made available by Mexico’s energy minister. There will be between 30 and 40 zones where private companies will be able to bid in the first tender. As has been reported widely, Mexico has an enormous, untapped oil reserve. The first round of public tenders will likely take place in early 2015.
Royal Dutch Shell, ExxonMobil and other foreign oil companies are reportedly interested and actively monitoring the recent legislative activity surround the proposed tenders.
As the new law outlines, foreign and private domestic energy companies will be permitted to explore, produce and refine oil. In 1938 Petróleos Mexicanos (Pemex) was created to perform these duties and has since done so exclusively. The new regime is the first time ever the Mexican government has permitted foreign or private energy companies to participate in this work.
Zepeda told news reporters that no big surprises should be expected from the tender process. That Pemex’s requests for some biddings to be reserved for its exclusive tender – will not be. In particular, where there are areas that Pemex does not have a demonstrated expertise – the government will be seeking foreign experts. Deepwater and unconventional drilling and exploration are some examples.
In the future, Mexico’s Congress will decide on further tenders. They will retain the right to award or not reward certain areas for public tender in the future. Mario Gabriel Budebo, a former hydrocarbons undersecretary, told media reporting on the matter that any new law should clearly spell out what criteria would be useful for those future tenders. In particular, he cited the need for clarity in the areas of licenses, profit or production-sharing contracts
After the initial tenders are completed, Mexico’s Comisión Nacional de Hidrocarburos (CNH) will administer annual tenders aimed at exploiting the approximately 115bn barrels of oil (equivalent) that is estimated that Mexico contains and that Pemex is unable to develop.
Zepeda told reports that the tender is likely going to take place next summer. And that “Blocks could range from 150 sq km for shallow-water fields to up to 500 sq km in deep waters and as big as 1,500 sq km in virgin areas.”
Despite these sweeping changes to the energy sector, the Mexican economy is predicted to grow at 2.7 percent this year – a slower growth level than what many had hoped for. As a result, Mexico’s President, Enrique Pena Nieto – has seen his popularity dip. Despite this, he promises to continue to focus on reform – and it appears clear too, that despite any political developments in the future, it’s likely that Mexico’s’ economy has been permanently changed to one open to the world.
Photo credit: Oil and rig by Curraheeshutter / www.bigstockphoto.com