Mexico’s energy reforms and production outlook

Mexican President Enrique Pena Nieto visits oil drilling platform
Mexican President Enrique Pena Nieto (R) visits the Centenario GR drilling platform in 2014, just before opening the country’s oil sector to foreign investors (source: dpa)
  • Declining output and the shale revolution forced Mexico to open up its energy sector
  • Foreign investment is especially needed in deepwater and unconventional resources
  • After shaky start, auction process is improving
  • Serious political opposition remains to breaking up Pemex’s upstream monopoly

In 1938, Mexico became one of the first countries in the world to nationalize its oil industry. Until 2013, it remained one of the few countries – and the only member of the Organisation for Economic Cooperation and Development (OECD) – to close its upstream oil and gas sector to private international investment.

However, Mexico broke with these long-standing policies three years ago, when a sweeping overhaul of the energy industry was approved as part of a wider government program of economic and social reforms. The constitutional changes ended the 75-year monopoly enjoyed by the state oil company, Petroleos Mexicanos (Pemex), and opened the sector to international oil companies.

The government hopes that these reforms will modernize its oil and gas industry and help stabilize and then reverse a steep fall in domestic oil production. Several risks to the reform process remain and it is unlikely that Mexico will return to the output levels of its pre-peak heyday anytime soon. I

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