MEXICAN LAW BLOG business & opportunities in Mexico

The Future of Offshore Oil Drilling in Mexico


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Photo credit: Global Santa Fe Rig 140 by ST33VO

Despite the Deepwater Horizon oil spill and natural gas fracking boom three years ago, experts expect offshore oil drilling in the Gulf of Mexico to produce huge amounts of oil. Big finds, which are known as “elephant fields” by engineers, have the power to produce for at least 50 billion barrels over the next 20 years.

For Mexico, this is a pleasant surprise as its oil production had started decreasing since 2004. With the aging of oil fields and lower returns from the largest field Cantarell, the US Energy Information Administration (EIA) believed that Mexican oil production would continue declining. However, with the introduction of the August 2013 energy reform proposal, President Enrique Peña Nieto has focused on attracting foreign investors to boost oil production and build Mexico’s economy.

As the US is Mexico’s largest trading partner, the economic growth of the latter is deemed of great importance. This is why a number of US oil companies have signed a Memorandum of Understanding (MOU) with Mexico’s national oil company Petróleos Mexicanos (PEMEX). One of the latest to jointly develop, own and operate a facility in Mexico is Keppel Offshore and Marine.

Keppel has signed up with PEMEX’s subsidiaries PEMEX Exploración y Producción and P.M.I. Norteamerica S.A. de C.V. In his congratulatory message, CEO of PEMEX Emilio Lozoya said, “This MOU highlights PEMEX’s commitment to increase oil and gas production in the long term by developing a sustainable offshore and marine industry in Mexico that can readily meet our needs. By partnering with the world’s leading rig builder Keppel, we are confident that the shipyard will be a success and help to provide a wide array of solutions for the production of oil and gas. Mexico’s proven reserves of oil and gas at the start of 2013 is almost 14 billion barrels of crude-oil equivalent and we believe that a significant number of shallow water and deep-water drilling rigs as well as FPSOs and FLNGs will be required to maximize production in the years to come.”

The US Senate has passed legislation in October to enact an international treaty to govern oil drilling in the Gulf of Mexico. Through it, a framework for oil and gas development across both countries’ maritime boundary would be implemented. Alaska Senator Lisa Murkowski explained, “In addition to opening up nearly 1.5 million acres of the outer continental shelf, it also ensures that any exploration along our maritime border adheres to the highest degree of safety and environmental standards.”

The House and Senate are yet to decide whether or not to exempt publicly traded companies from disclosing what they pay other countries for drilling and collecting oil and natural gas. However, once the treaty goes through, the Bureau of Ocean Energy Management believes that both countries will have access to 172 million barrels of oil and 304 billion cubic feet of natural gas.

Aside from benefiting the US and ensuring its place as the top oil and gas producer in the world, offshore drilling in the Gulf of Mexico will boost Mexico’s economic development. With more jobs and an added competitiveness in the international market, the growth in oil production will increase the 3% economic growth by 1-2% this year.

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Alberto Esenaro

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By Alberto Esenaro
MEXICAN LAW BLOG business & opportunities in Mexico

About Author

Alberto Esenaro

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