Photo credit: Oil Rig Promet by Jay Phagan
December 2013 marked the opening of Mexico’s state-monopolised energy industry after 75 years. The reforms that led to the change will allow international investors to become part of this lucrative sector and ultimately boost Mexico’s economy. NAFTA, the North American Free Trade Agreement, partners will also be able to enjoy the benefits of an integrated energy market in North America, which include more job opportunities and economic equality.
Canada, which first feared that its investors would shift their investment flow to Mexico, is now surer that its energy exports will still be in demand. This is due to an open trade and investment strategy that was established between Canada and the US in the 1980s and still works today. With its fears mitigated, the country is ready to play a major role in Mexico’s revolutionised energy sector.
Canada will be providing its capable energy companies, pipelines and ancillary services, three things President Enrique Pena Nieto believes his country needs. The Mexican energy sector has become a challenge on the economy due to ageing oil refineries, lack of deep water drilling equipment and expertise, and unstable oil production. Canada’s energy companies would have the opportunity to set up their operations in Mexico to try solving these issues.
The U.S., which experienced its biggest oil boom this year, will also be one of the major contributors to the industry. State-owned oil company PEMEX is eyeing U.S. independents that produce 54% of domestic oil, 85% domestic gas, and drill 95% of domestic oil and gas wells. By entering into joint ventures with these companies, PEMEX will be able to develop half-exploited fields or develop them before drafting a new contract with private companies. That aside, PEMEX will learn the techniques and technologies it lacks and needs to drill Mexican oil wells.
With these contributions, the three countries forming NAFTA will become a powerful energy front and their relations are bound to grow stronger. For starters, Canada will not consider Mexico to be its top competitor. In addition, issues like the immigration of Mexicans to the U.S. will be reduced. In fact, the U.S. is optimistic that the debate over the immigration reform will end. Governor Rick Perry commented, “I think immigration reform is going to be very passé. It’s going to be part of the past. And one of the reasons is that when Mexico liberalises the energy policy down there and the Mexicans who are here illegally go home. And as a matter of fact there might be a lot of folks who maybe are U.S. citizens going to Mexico looking for jobs in the energy industry.”
The new energy regime is bound to bode well for Mexico and its people. Current Administration is trying to set up programs to consolidate the middle class, decrease the poverty, and improve the education system. If these reforms succeed, will ultimately benefit the U.S. and Canada, as they will gain an economically stable NAFTA partner.