Mexico poised to enter major leagues as oil producer - analysts

Having reformed its energy sector to allow for greater private investment, Mexico is poised to become a global oil producer by 2025 and take "pole position" in energy investment in the Americas, according to analysts.

"By 2025, Mexico will have gone from being a major supplier to a strategic supplier," according to David Goldwyn, a former US special envoy and coordinator for international energy affairs.

"If International Energy Agency predictions of non-OPEC oil peaking around 2020 are true, Mexico will be a big producer and hugely important for global oil markets."

Mexico has the chance to be in pole position for investment in the sector in the hemisphere, he told the press.

However, with pressure on international oil prices, Mexico will have to ensure that the terms it offers oil companies are attractive enough to lure them to the country amid attractive prospects worldwide, he said.

The Energy Information Administration (EIA) predicts oil prices of around US$109/b in 2015, with a worst-case scenario of US$70/b

But with oil from Mexico's vast deep-water potential unlikely to start flowing for a decade, "we could be dealing in a world with US$80 [a barrel] oil," Goldwyn said.

Oil prices will dictate worldwide investment choices, he said, pointing out that Britain and Norway have offered tax breaks to attract investors to marginal fields.

Mexico has estimated resources of 160Bb of oil equivalent, which includes a potential 55Bb in deep waters and about 60Bb in shale.

Mexico's undersecretary for oil Enrique Ochoa forecasts that the country's oil output, which has dropped by almost 1Mb/d since 2004, will increase from the current 2.5Mb/d to 3Mb/d by 2018 and to 3.5Mb/d by 2025. Mexico is the world's 10th largest crude producer but imports a third of its natural gas and half of its gasoline.

In the wake of Mexico's energy reforms, annual investment in the sector is expected to rise to up to US$50bn a year, according to analysts.

"Mexico has the potential to become a serious player. Very few countries can produce more than 3Mb/d, and Mexico is one. If they add another 1Mb/d of oil production or even double output, that may put them among the top five or six in the world," according to Jed Bailey at consultancy Energy Narrative in a report on Mexico's energy reforms.