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Experts: Mexican oil could have profound regional impact

Mexican government opening the doors to investors after 70 years of state monopoly.

By
Daniel J. Graeber
Reforms embraced by Mexican President Enrique Peña Nieto could transform regional energy landscape, experts told a House subcommittee. File Photo by UPI/Photo by Dennis Brack
Reforms embraced by Mexican President Enrique Peña Nieto could transform regional energy landscape, experts told a House subcommittee. File Photo by UPI/Photo by Dennis Brack | License Photo

WASHINGTON, July 24 (UPI) -- The opening up the Mexican energy sector under the Peña Nieto administration could bring profound changes to regional energy security, experts testified.

A subcommittee on the Western Hemisphere in the House Foreign Affairs Committee heard testimony about the impacts of Mexican President Enrique Peña Nieto's decision to open Mexico up to private investors after more than 70 years under a monopoly controlled by state-run Petroleos Mexicanos, or Pemex.

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"In hydrocarbons production, the completion of these reforms gives the United States, Canada and Mexico an opportunity to make North America a new foundation for global energy security," Carlos Pascual, a former U.S. ambassador to Mexico and senior vice president for consultant firm IHS, testified.

The government recently auctioned off rights to 14 tracts covering an estimated 2,600 square miles with reserve estimates of around 686 million barrels of oil equivalent, with most of that existing as light crude oil. The auction drew interest from mid-sized energy companies like Australia's Woodside Petroleum, though few of the supermajors like French energy company Total registered for the bidding round.

Once reforms are in full swing, Pascual said the North American energy landscape could transform global dynamics. With high-end U.S. production estimates of 13.3 million barrels of oil per day and 4.3 million bpd from Canada, Mexico's potential additions would position North America as a rival to the Organization of Petroleum Exporting Countries.

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"North America will not act like an oil cartel," he said. "Rather, it represents three democratic and market-oriented states establishing a reliable base of production that will set standards in international conduct and transparency in energy development and trade that can influence the global industry."

Peña Nieto last year set a goal of producing 3.5 million barrels of oil per day by 2025, which would be a 40 percent increase from 2013 levels. With reforms in place, the U.S. Energy Information Administration said Mexican production holds steady at around 2.9 million bpd through 2020.

Eric Farnsworth, vice president of the Council of Americas, testified Mexican plans to auction off onshore shale oil and gas reserves and deepwater rights should draw more interest from major energy companies. With emerging and sustained interest, Mexico could replicate recent production gains form the United States.

"Just as the shale revolution increased U.S. oil production by more than 55 percent, the application of new technology, capital, and best management practices could catalyze a similar jump in oil and gas production in Mexico," he said.

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