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Study finds Mexico's energy reforms represent 'abundant opportunities'

Jan. 31, 2014 at 1:00 PM   |   Comments

BIRMINGHAM, Ala., Jan. 31 (UPI) -- U.S. energy companies will benefit from "abundant opportunities" as a result of Mexico's energy reforms, a private economic analysis indicated.

Mexico's energy overhaul, approved by Congress last month, ends the monopoly of state-owned Mexican oil company Petroleos Mexicanos, known as Pemex, and opens all segments of the energy sector to private firms for the first time in 75 years.

A report by financial services firm BBVA Compass, based in Birmingham, Ala.., concluded the investment and new projects expected to flow from Mexico's energy reforms could mean 2.5 million new jobs in Mexico by 2025.

"More jobs in Mexico could potentially reduce illegal immigration," BBVA Compass economist Marcial Nava said in a webinar this week, the Houston Chronicle reports.

Nava predicts the reforms will pump about $1.2 trillion to the Texas-Northern Mexico region in the next decade.

"If these border towns effectively seize the opportunity," Nava said in a statement, the U.S.-Mexico border "could see one of the most dramatic transformations in its history."

The BBVA Compass report notes the Burgos Basin -- a largely unexplored Mexican side of the Eagle Ford -- could contain more than 300 trillion cubic feet of technically recoverable shale gas. The country's other shale plays -- the Sabinas, Tampico and Veracruz Basins -- are estimated to hold more than 1 trillion cubic feet of natural gas reserves.

Yet in 2012, BBVA says, the Mexican government approved drilling of three shale oil and gas wells, compared to 9,100 approved by the United States that same year.

Mexico's energy reforms, however, will scrap the limitations that prevented international investment in Mexico's shale plays.

"Companies familiar and experienced with the Eagle Ford such as EOG Resources, Chesapeake, and ConocoPhillips, have comparative advantages and could lead Mexico's shale gas transformation," Nava said in the BBVA report.

If Mexico chooses to hold off on exploration, it will still need increased pipeline infrastructure to support increased demand for natural gas imports.

"Even if the country continues to import natural gas, it needs the infrastructure for that natural gas and to lower the prices to households," Nava said, noting that the United States currently provides 80 percent of Mexico's natural gas, 60 percent of which comes via pipelines from Texas.

Secondary laws are still needed to translate the reforms into a workable framework, BBVA Compass notes.

In an interview last week with the Chronicle, Gustavo Madero, president of Mexico's opposition National Action Party, said the additional regulatory agencies that are going to be developed to oversee Mexico's energy sector "need to be well designed -- strong and autonomous -- to handle all the changes that are proposed."

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