Energy Watchblog: Mexico

Mexico's top energy stories of 2013

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje3VaNsaldPesHSt_gHPq8MsazdgV6MvQQxCEJa4NvrIQPA0_tw9V6WCdKu755YZLN0mZdTjYTgQrEQbJAYrNtRT6owX9xD5b34MEYquoySuMtx7SfVuboG8LXCrGadJ9ZD_4-Clr86O-w/s1600/la-afp-getty-mexico-reform-energy-pemex-pena-20130813.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEje3VaNsaldPesHSt_gHPq8MsazdgV6MvQQxCEJa4NvrIQPA0_tw9V6WCdKu755YZLN0mZdTjYTgQrEQbJAYrNtRT6owX9xD5b34MEYquoySuMtx7SfVuboG8LXCrGadJ9ZD_4-Clr86O-w/s320/la-afp-getty-mexico-reform-energy-pemex-pena-20130813.jpg" width="233" /></a></div><br /><span style="clear: left; float: left; font-size: small; margin-bottom: 1em; margin-right: 1em;"></span><br /><br /><div class="text-contenido" style="background-color: white; font-family: Arial, Helvetica, 'Helvetica Neue'; margin: 0px 10px 0px 0px;"><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><b>1) Congress passes landmark energy reform</b></div><div style="line-height: 18px; margin-bottom: 20px;">This one was big and may fit better into other categories like "Top Mexico stories of 2013" or "Top Mexico energy stories of the decade."</div><div style="line-height: 18px; margin-bottom: 20px;">After months of expectation, congress brought a bill forward December 7 and passed it within six days. The legislation brings unprecedented openness to both the oil and gas and electric power sectors.</div><div style="line-height: 18px; margin-bottom: 20px;">In oil, the Mexican state will be allowed to contract with private companies across the value chain, including production sharing and licensing agreements in E&P. National oil company Pemex is being transformed into a "productive public enterprise," whose first goal will be maximizing profit.</div><div style="line-height: 18px; margin-bottom: 20px;">In electric power, a competitive generation market will be created and administered by an ISO called Cenace. While transmission and distribution infrastructure remain property of the state, power retail will also be open to privates. Likewise, state-owned power utility CFE will become a "productive public enterprise" and seek profit first.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>2) Pemex tenders integrated service contracts at Chicontepec</b></div><div style="line-height: 18px; margin-bottom: 20px;">Pemex's third round of integrated service contracting took place at the unconventional Chicontepec basin with surprising results.</div><div style="line-height: 18px; margin-bottom: 20px;">Three of the six blocks on offer were snatched up, with the other three blocks receiving no bids. Halliburton, Operadora de Campos DWF and Baker Hughes' Petrolite each won a block, but with surprisingly low bids of US$0.01/b, US$0.98/b and US$0.49/b, respectively.</div><div style="line-height: 18px; margin-bottom: 20px;">The services companies expect to have the cost recovery mechanism be profitable on its own. Pemex is retendering the three failed blocks, expected for awarding in January.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>3) CFE blames losses on fuel costs</b></div><div style="line-height: 18px; margin-bottom: 20px;">CFE said its US$1.50bn net loss in 2012 could be attributed almost entirely to higher consumption of heavy fuel oil. The trend continued through 2013, with CFE saying its US$474mn loss in Q3 was also caused by fuel oil costs.</div><div style="line-height: 18px; margin-bottom: 20px;">While the continued losses for the firm are concerning in themselves, they were indicative of a larger problem in Mexico: the country does not have enough natural gas.</div><div style="line-height: 18px; margin-bottom: 20px;">CFE, which had to rely more heavily on old, fuel oil generators, is only one of the firms in Mexico to suffer from insufficient natural gas transportation capacity.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>4) Pemex Los Ramones tender flops, takes control of project</b></div><div style="line-height: 18px; margin-bottom: 20px;">In 2013, Pemex issued a call for bidders on the 740km, 1.43Bf3/d (40.5Mm3/d) Los Ramones II pipeline, said to be the backbone of the natural gas transportation system.</div><div style="line-height: 18px; margin-bottom: 20px;">The long-awaited project is expected to guarantee long-term gas imports from the US. But when bids were due, only one group, a consortium between France's GDF Suez and Spain's Enagás, tabled a bid.</div><div style="line-height: 18px; margin-bottom: 20px;">Pemex rejected the bid and took control of the project, promptly announcing it would be forming JVs withSempra's Mexico unit IEnova and GDF Suez to build the project in two phases.</div><div style="line-height: 18px; margin-bottom: 20px;">Some experts say Pemex had always wanted to build the project on its own and had designed the tender fail.</div><div style="line-height: 18px; margin-bottom: 20px;"><b>5) Mexico launches first large-scale solar plant</b></div><div style="line-height: 18px; margin-bottom: 20px;">In September, Mexico's first large-scale solar PV plant, the 30MW Aura Solar I, started generating power and it was not CFE who built it.</div><div style="line-height: 18px; margin-bottom: 20px;">The 100 hectare project was built by Gauss Energía, with Martifer Solar on EPC and Suntech providing panels, and was financed by private capital and the International Finance Corporation (IFC).</div><div style="line-height: 18px; margin-bottom: 20px;">The project was a huge step forward for solar in Mexico as IFC saw profitability in Mexico's small producer private generation model.</div><div style="line-height: 18px; margin-bottom: 20px;">Gauss expects this to be the first of many stages at the Aura Solar complex.</div></div>

Mexico's top energy stories of 2013

1) Congress passes landmark energy reform This one was big and may fit better into other categories like "Top Mexico stories of 2013...

Latin America's top 10 onshore E&P projects

<div class="p1"><b>1) Vaca Muerta - Argentina</b></div><div class="p2">Vaca Muerta is one of the world's largest shale plays with estimated reserves of 22.8Bboe. Argentina's state-controlled YPF, Apache,Chevron, Total, ExxonMobil and Arpetrol are among the companies to have invested in exploration. The Loma La Lata Norte and Loma Campana areas alone are expected to attract investments of US$15bn.</div><div class="p3"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqFASaWpEW1_ws2ZX_pY2ExSg17p9PGTS1d-WqenET6ho7IEIFB5sly0yvGLd3GTK13uO8uSfC5C4uJfiKYX-z8_cmVRfUHRJ-qPp7Tg2y6H6qV1kKJpaAdo4Y_EXiTF_Y00omCk3WX7hp/s1600/250px-Latin_America_%2528orthographic_projection%2529.svg.png" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhqFASaWpEW1_ws2ZX_pY2ExSg17p9PGTS1d-WqenET6ho7IEIFB5sly0yvGLd3GTK13uO8uSfC5C4uJfiKYX-z8_cmVRfUHRJ-qPp7Tg2y6H6qV1kKJpaAdo4Y_EXiTF_Y00omCk3WX7hp/s200/250px-Latin_America_%2528orthographic_projection%2529.svg.png" width="200" /></a></div><div class="p4"><b>2) Yasuní ITT (blocks 31 and 43) - Ecuador</b></div><div class="p4">State E&P operator Petroamazonas would develop the area home to an estimated 890Mb. Development of fields Tiputini and Tambococha to reach peak average of 200,000b/d from these areas will require US$2.8bn, and US$5bn if Ishpingo is developed.</div><div class="p5"><br /></div><div class="p4"><b>3) Junín 4 - Venezuela</b></div><div class="p4">Operated by Empresa Mixta Petrourica, a joint venture between Venezuela's state oil company PDVSA and China's CNPC, the Junín 4 area will produce up to 400,000b/d of heavy crude, according to the Venezuelan government. Junín 4 is located near El Destino, in the prolific Orinoco belt.</div><div class="p5"><br /></div><div class="p4"><b>4) Junín 10 - Venezuela</b></div><div class="p4">According to PDVSA Junín 10 has a production potential of 220,000b/d. Investment in the area is expected to reach US$14.1bn.</div><div class="p5"><br /></div><div class="p4"><b>5) Quifa SW - Colombia</b></div><div class="p4">Canada's Pacific Rubiales plans to double oil production from the heavy oil field following the implementation of its enhanced oil recovery scheme next year. Quifa SW has net 2P reserves of 73.1Mboe, about 21% of Pacific Rubiales' certified oil and liquids reserves base in Colombia.</div><div class="p5"><br /></div><div class="p4"><b>6) Burgos - Mexico</b></div><div class="p4">The Burgos basin has long been Pemex's largest gas producer but has seen production slip 14.2% since the beginning of 2013 to 1.19Bf3/d. It will see investment of 22.4bn pesos (US$1.70bn) in 2014, but that looks to get slashed in 2015 to 8.44bn pesos. The challenge for Burgos is moving into unconventional plays. The US Eagle Ford play stretches into Burgos and Pemex has made two shale discoveries in the play to date.</div><div class="p5"><br /></div><div class="p4"><b>7) Blocks 67, 57 - Peru</b></div><div class="p4">State hydrocarbons promotion agency Perupetro expects natural gas and crude commercial production on blocks 67 and 57 to begin by year-end. Perenco block 67 output will start with 6,000b/d with the goal of reaching 30,000b/d in 2017 and peak production of 60,000b/d in 2019. The block's proved reserves total around 100Mb. In the case of block 57, operated by Petrobras and Repsol, initial production is pegged at 5,600b/d NGLs and 85Mf3/d (2.41Mm3/d) gas with the aim of reaching 9,300b/d and 160Mf3/d in 2016. Proved reserves total around 562Bf3 and 30.7Mb NGLs.</div><div class="p5"><br /></div><div class="p4"><b>8) São Francisco basin - Brazil</b></div><div class="p4">Following the loud but until now hollow claims of local startups OGX and HRT, Petra Energia has opted for a tip-toe approach to its 24-block São Francisco basin campaign in Minas Gerais state. Petra earlier this year confirmed the existence of hydrocarbons at the 1-PTRA-17-MG well in block SF-T-121 and BNamericas tips more good news to come from the company's 7km2 acreage. Petra has already confirmed the presence of unconventional "tight" natural gas in 21 São Francisco wells and expects to begin production from the area in 2015.</div><div class="p5"><br /></div><div class="p4"><b>9) Chicontepec - Mexico</b></div><div class="p4">Despite accumulated investment of 183bn pesos, the unconventional, largely tight oil, area has failed to be an important producer for Pemex with production at just 61,000b/d. Investment in 2014 is expected to be 13.6bn pesos, 11.1bn in 2015, and 20.4bn pesos in 2016. The question is whether Pemex's integrated service contracts can attract new technologies and more productive wells at Chicontepec.</div><div class="p5"><br /></div><div class="p4"><b>10) Parnaíba blocks 2, 3 - Brazil</b></div><br /><div class="p4">Franco-Belgian firm GDF Suez earlier this month bought a 20% stake in the Parnaíba basin's blocks 2 and 3 from Brazilian mining giant Vale, describing the combined 6,137km2 area as "little explored but high in natural gas potential." GDF Suez, alongside partners Petrobras and BP are set to drill the first exploration wells from both blocks in March.</div>

Latin America's top 10 onshore E&P projects

1) Vaca Muerta - Argentina Vaca Muerta is one of the world's largest shale plays with estimated reserves of 22.8Bboe. Argentina's st...

Banamex Analysts: Cheaper natural gas to aid Mexico's petrochemical sector

<div class="separator" style="clear: both; text-align: center;"></div><span style="clear: left; float: left; font-family: Times, Times New Roman, serif; margin-bottom: 1em; margin-right: 1em;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiO0_KPFM-c6UvomN5-SWBFh1F-45opeJcoD4aJx6LdnQJXL7bB_CQoNUIRP3k1YfjDTKDuT_XjTueuHXacw3rlg5zl4oqUrkuhRWxWOv5hfjY4PoE7CLeFUlCjX5YZ9StqzUB44-dWMV8G/s1600/mexichem_250313.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="192" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiO0_KPFM-c6UvomN5-SWBFh1F-45opeJcoD4aJx6LdnQJXL7bB_CQoNUIRP3k1YfjDTKDuT_XjTueuHXacw3rlg5zl4oqUrkuhRWxWOv5hfjY4PoE7CLeFUlCjX5YZ9StqzUB44-dWMV8G/s320/mexichem_250313.jpg" width="320" /></a>The opening of Mexico's natural gas sector to private investment will lower prices and allow local firms to increase their production capacity for petrochemical-based products, according to analysts. <span style="background-color: white; line-height: 18px;">Mexican firms such as Mexichem and Alpek will be benefited by the lower prices and be able to grow their presence in the sector, according to a report analyzing Mexico's energy reforms by Banamex Accival Casa de Bolsa. Both companies are currently investing to expand their production capacity to take advantage of the price differential between ethylene and natural gas. </span></span><span style="clear: left; float: left; font-family: Times, Times New Roman, serif; margin-bottom: 1em; margin-right: 1em;"><span style="background-color: white; font-family: Times, Times New Roman, serif; line-height: 18px;">"Mexichem is investing in the production of 550,000t of vinyl chloride monomer (VCM) in the US, while Alpek plans similar investment with a plant supplied by natural gas in Mexico," the report states. </span><span style="background-color: white; line-height: 18px;">VCM is a chemical used to produce polymer and polyvinyl chloride (PVC). </span><span style="background-color: white; line-height: 18px;">The expectation is that the energy reforms will contribute to an increase in the supply of ethane/propane, which have a high concentration of natural gas, and to a deregulation of the downstream sector, which will in turn lead to a drop in prices, the report states.</span></span><br /><div class="text-contenido" style="background-color: white; margin: 0px 10px 0px 0px;"><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">Alpek is expected to invest in the construction of plants producing monoethylene glycol (MEG) in Mexico and an ethylene plant in the short term in order to take advantage of the lower gas prices.</span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">"The confirmed availability of gas will probably lead Alpek to build an MEG plant in Mexico, instead of in the US," the report states.</span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">Mexichem is also likely to expand its VCM production in Mexico, after having begun to build a cracker plant in Texas in partnership with US firm Oxychem. </span><span style="font-family: Times, 'Times New Roman', serif;">Mexichem is currently building a 200MW cogeneration plant powered by natural gas in Altamira, in the northeastern state of Tamaulipas, and could approve the construction of another one in Salamanca, in the central state of Guanajuato. </span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">"Mexico is the only country in the world where an artificial barrier was created in the petrochemical sector, and the reality is that the lack of investment in the sector by Pemex has created huge bottlenecks in the production chain, leading to more imports, which in 2013 surpassed US$23bn," according to an analysis of the reform by Mexican energy consultancy GMEC. </span></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">Mexico's petrochemical imports increased by 7.7% in 2013, while the petrochemical sector's contribution to GDP dropped by 0.4% to 1.2%, according to the national association of the chemical industry (ANIQ). </span></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"></div><div style="line-height: 18px; margin-bottom: 20px;"><span style="font-family: Times, Times New Roman, serif;">A lack of natural gas transportation infrastructure has meant that Mexican firms have suffered a supply deficit from the US, GMEC added, with Pemex importing more natural gas at a higher price to satisfy local demand.</span></div></div>

Banamex Analysts: Cheaper natural gas to aid Mexico's petrochemical sector

The opening of Mexico's natural gas sector to private investment will lower prices and allow local firms to increase their production ca...

Mexico Earns Upgrade, Outlook Could Support Bonds

<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYwLb_K26AmXNKcJtoyCbUfhUsgtn2Td-1HxmllGSuoRYLstROxefCE06vkgKtIaRrM9uAGO0YfoMb9A4yhgLE_IYgPC4NG6tc0IRg_J9hw2x54S9tYXukTjEuC0CfriQOAL7TR33Cjk_8/s1600/arrow-graph-by-flickr-user-ndeviltv-find-link-to-pic.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhYwLb_K26AmXNKcJtoyCbUfhUsgtn2Td-1HxmllGSuoRYLstROxefCE06vkgKtIaRrM9uAGO0YfoMb9A4yhgLE_IYgPC4NG6tc0IRg_J9hw2x54S9tYXukTjEuC0CfriQOAL7TR33Cjk_8/s320/arrow-graph-by-flickr-user-ndeviltv-find-link-to-pic.jpg" width="320" /></a></div><div><br /></div><span style="background-color: white;">Mexico earned a higher debt rating from Standard & Poor's on Thursday and expectations of more upgrades to come could help support Mexican assets in the coming months even as the government borrows more.</span><br /><div class="separator" style="clear: both; text-align: center;"><a href="http://s1.reutersmedia.net/resources/r/?m=02&d=20131220&t=2&i=822923868&w=580&fh=&fw=&ll=&pl=&r=CBRE9BJ06MF00" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="237" src="http://s1.reutersmedia.net/resources/r/?m=02&d=20131220&t=2&i=822923868&w=580&fh=&fw=&ll=&pl=&r=CBRE9BJ06MF00" width="320" /></a></div><span style="background-color: white;"><br /></span>Standard & Poor's raised its main credit rating for Mexico by one notch in the latest sign of growing confidence in this month's move by the government to open the state-run energy sector to private investment.<br /><br />S&P had lagged the other two main agencies, Moody's Investors Service and Fitch Ratings, which both have Mexico just one notch shy of an "A" rating. Chile is the only Latin American nation that has an "A."<br /><br />Analysts, fund managers and Mexico's government think the country could earn another upgrade by at least one of the agencies as soon as early next year.<br />"We are closer today than we have ever been to an 'A' category," Alejandro Diaz de Leon, head of Mexico's debt office, told Reuters in a telephone interview.<br /><br />"There is a lot of upside in the near future if the implementation of the energy reform continues as planned."<br /><br />The approval of President Enrique Pena Nieto's energy reform bill by a divided Congress this month caps a year of major economic legislation, including bills to boost lending, lower telecommunications costs and improve tax collection.<br />But lawmakers still need to flesh out the energy overhaul with legislation that will determine whether Mexico will offer tax rates that are lucrative enough to spur an investment boom.<br /><br /><b>MEXICO BONDS</b><br />S&P's upgrade was largely expected by the market, and the country's peso only briefly pared losses amid concerns that less U.S. monetary stimulus will sap demand for emerging market assets in the coming year.<br /><br />Expectations the U.S. Federal Reserve could keep cutting back its monthly bond purchases are seen driving yields on emerging market debt higher next year. But Mexico's peso and its local-currency bonds have already suffered less than other emerging markets and optimism about Mexico could help bond yields continue to perform better than other riskier assets.<br /><br />Analysts said strong progress once Mexican lawmakers resume work in February on the energy reform's secondary legislation could spur the next ratings upgrade.<br /><br />Alonso Cervera, an economist at Credit Suisse in Mexico City, said Moody's would likely put Mexico into the "A" category next year and that bond yields would likely fall.<br /><br />"I think the curve is way too steep and we are likely to see a flattening trend in the next few months, even if the Fed continues to taper," Cervera said in an emailed response to questions.<br /><br />The yield on Mexico's benchmark 10-year peso bond has spiked more than 80 basis points higher since late October to 6.40 on Thursday, near a three-month high.<br /><br />The flurry of reforms this year has made Mexico stand out from other emerging markets, such as Brazil, which have been raising concerns among investors for more interventionist and protectionist economic policies.<br />"It is very important that an economy like ours, which is a small open economy, does what we can to improve the perception about the resilience of the economy," Diaz de Leon said.<br /><br />Meanwhile, Pena Nieto's government is milking international optimism by boosting the amount of debt it will issue next year. On Thursday, the finance ministry released its latest capital market issuance plan, which foresees increasing shorter-term debt sales in the first quarter of next year.<br />After originally promising to stick to a balanced budget this year, the government got lawmakers to support a deficit of 0.4 percent of gross domestic product this year and an even wider 1.5 percent deficit next year.<br />The government is seeking more debt to help fuel stronger growth. Mexico's economy slumped this year to around a 1.3 percent annual expansion from a 3.8 percent rate in 2012.<br /><br />Analysts in a central bank poll issued on Thursday lifted their outlook for growth next year to 3.41 percent, up 7 basis points from a poll late last month before the energy reform bill was approved.<br /><br />In the latest sign of stronger growth, a separate report on Thursday showed Mexican retail sales rose in October at the fastest pace in nine months, following two months of declines.

Mexico Earns Upgrade, Outlook Could Support Bonds

Mexico earned a higher debt rating from Standard & Poor's on Thursday and expectations of more upgrades to come could help support M...

Mexico poised to enter major leagues as oil producer - analysts

<div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggXCtknpQWHTU_9hV1wZrf8NlKbJ81nszsD_qKWKjknB7ukDmHdo2jUjnop7EAU7kFMaVrlat0DXboq9HNj5Yb4bYkJBXScuaXqrShzw_T0k_9LFCXDtZsstS6l4SoKdoRuSGpsZbgHKeX/s1600/Mexico-Oil-Petroleo.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEggXCtknpQWHTU_9hV1wZrf8NlKbJ81nszsD_qKWKjknB7ukDmHdo2jUjnop7EAU7kFMaVrlat0DXboq9HNj5Yb4bYkJBXScuaXqrShzw_T0k_9LFCXDtZsstS6l4SoKdoRuSGpsZbgHKeX/s1600/Mexico-Oil-Petroleo.jpg" /></a></div><span style="font-size: small;">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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">"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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">"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."</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">Mexico has the chance to be in pole position for investment in the sector in the hemisphere, he told the press.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">The Energy Information Administration (EIA) predicts oil prices of around US$109/b in 2015, with a worst-case scenario of US$70/b</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">Mexico has estimated resources of 160Bb of oil equivalent, which includes a potential 55Bb in deep waters and about 60Bb in shale.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="font-size: small;">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.</span></div><div style="background-color: white; background-repeat: no-repeat no-repeat; border: medium none; font-family: Verdana,Geneva,sans-serif,Arial,Helvetica; line-height: 22.3906px; list-style-type: none; padding: 0px 0px 7px 12px;"><span style="background-repeat: no-repeat no-repeat; border: medium none; font-size: small; line-height: 1.6em; list-style-type: none; margin: 0px 0px 10px; padding: 0px 0px 7px 12px;">"Mexico has the potential to become a serious player. Very few countries can produce more than </span><span style="font-size: small;">3Mb/d<span style="background-repeat: no-repeat no-repeat; border: medium none; line-height: 1.6em; list-style-type: none; margin: 0px 0px 10px; padding: 0px 0px 7px 12px;">, and Mexico is one. If they add another </span>1Mb/d<span style="background-repeat: no-repeat no-repeat; border: medium none; line-height: 1.6em; list-style-type: none; margin: 0px 0px 10px; padding: 0px 0px 7px 12px;"> 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.</span></span></div>

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...

North America to Drown in Oil as Mexico Ends Monopoly

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields.<br /><div id="lead_graphic"><div class="separator" style="clear: both; text-align: center;"><br /></div><div class="separator" style="clear: both; text-align: center;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgS0joW2RJFSyWduhLMGXEAisqMBNAxZ1PDVu9snPFlG4WczT4YPdcVAn0Ps5lyfK4eOqysJAF-TS-gUaXV4a_TXLBdTlzLo0ZUqULjsFPhzGqyI7AExw7P5K52ApB-0tfXYZywHLeUimL0/s1600/iRvYObLYbSOI.jpg" /></div><br /><div class="photo_caption"><span style="font-size: x-small;">The  Petroleos Mexicanos (Pemex) La Muralla IV deep sea crude oil platform  in the waters off Veracruz, Mexico, on Aug. 30, 2013. Photographer:  Susana Gonzalez/Bloomberg</span></div><div class="photo_caption"><br /></div></div><div class="page current" id="_page1"><div class=""><div id="authorial"><span class="byline"><span class="byline-text">Joe Carroll and Bradley - BB</span></span><br /><span class="byline"><span class="byline-text"><br /></span></span></div></div>Plagued by almost a decade of slumping output that has  degraded Mexico’s take from a $100-a-barrel oil market, President  Enrique Pena Nieto is seeking an end to the state monopoly over one of  the biggest crude resources in the Western Hemisphere. The doubling in  Mexican oil output that Citigroup Inc. said may result from inviting  international explorers to drill would be equivalent to adding another  Nigeria to world supply, or about 2.5 million barrels a day.<br /><br />That boom would augment a supply surge from U.S. and Canadian wells that <span class="ticker_wrap"><span itemscope="" itemtype="http://schema.org/Corporation"><span itemprop="name">Exxon Mobil Corp.</span></span> (<a class="ticker" data-symbol="XOM:US" href="http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?ticker=XOM:US">XOM:US</a>)</span> predicts will vault North American production ahead of every OPEC  member except Saudi Arabia within two years. With U.S. refineries  already choking on more oil than they can process, producers from Exxon  to ConocoPhillips are clamoring for repeal of the export restrictions  that have outlawed most overseas sales of American crude for four  decades. <br /><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 1"><br /></div>“This is going to be a huge opportunity for any kind of player”  in the energy sector, said Pablo Medina, a Latin American upstream  analyst at Wood Mackenzie Ltd. in Houston. “All the companies are going  to have to turn their heads and start analyzing Mexico.” <br /><h2>Unprecedented Output </h2>An  influx of Mexican oil would contribute to a glut that is expected to  lower the price of Brent crude, the benchmark for more than half the  world’s crude that has averaged $108.62 a barrel this year, to as low as  $88 a barrel in 2017, based on estimates from analysts in a Bloomberg  survey. Five of the seven analysts who provided 2017 forecasts said  prices would be lower than this year.<br /><br />The revolution in shale  drilling that boosted U.S. oil output to a 25-year high this month will  allow North America to join the ranks of the world’s crude-exporting  continents by 2040, Exxon said in its annual global energy forecast on  Dec. 12. Europe and the Asia-Pacific region will be the sole crude  import markets by that date, the Irving, Texas-based energy producer  said. <br /><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 0"><br /></div>Exxon’s forecast, compiled annually by a team of company  economists, scientists and engineers, didn’t take into account any  changes in Mexico, William Colton, the company’s vice president of  strategic planning, said during a presentation at the Center for  Strategic and International Studies in Washington on Dec. 12.<br /><br />Opening  Mexico’s oilfields to foreign investment would be “a win-win if ever  there was one,” said Colton, who described the move as “very good for  the people of Mexico and people everywhere in the world who use energy.”  <br /><h2>$15 Billion Boost </h2>The bill ending the state monopoly was approved by the Mexican  Congress Dec. 12. Before becoming law, the proposal must be ratified by  state assemblies, most of which are controlled by proponents of the  reform. Oil companies will be offered production-sharing contracts, or  licenses where they get ownership of the pumped oil and authority to  book crude reserves for accounting purposes. The contracts will be  overseen by government regulators.<br /><br />Though some foreign companies  already operate in Mexico under service contracts with Petroleos  Mexicanos, or Pemex, the reform could increase foreign investment by as  much as $15 billion annually and boost potential economic growth by half  a percentage point, JPMorgan Chase & Co. said in a Nov. 28 report. <br /><h2>Potential Delays </h2>A  doubling in production as suggested by Citigroup’s Ed Morse would put  Mexican output at 5 million barrels a day, an unprecedented level for  Pemex, the state oil company created during nationalization in 1938.<br />  <br />U.S. crude production will expand to 9.5 million barrels a day  in 2016, the highest since the nation’s peak in 1970, the U.S. Energy  Information Administration said today. That contrasts with last year’s  EIA forecast that production would reach 7.5 million in 2019 before  gradually declining to 6.1 million in 2040. U.S. output reached an  all-time high 9.6 million in 1970.<br /><br />A doubling of Mexico’s output  maybe be slower to realize than the most bullish predictions as  companies confront barriers in accessing capital and human resources  needed for development, Riccardo Bertocco, a partner at Bain & Co.  in Dallas.<br /><br /><div class="">An increase of 1 million barrels a day in  output is the most realistic upper limit of what Mexico could achieve by  2025 based on the cost for new infrastructure, competition for new  fields and opportunities all over the U.S., Bertocco said in a telephone  interview Dec. 12. </div><div class="related_item tracked" data-action-type="Feature Template" data-actions="click" data-category="Inline Related Links" data-label="Position: 0"><br /></div><div class="">“The opportunities are there, but they are still far from being materialized,” he said.<br /><br /><h2 class="">Regulator Inexperience </h2>Drilling in Mexico will be  held back by a lack of infrastructure, such as pipelines, in some of the  potential shale developments. The government will need to decide on  details for development such as tax rates, royalty structures and  standards for booking reserves, Kurt Hallead, an analyst at RBC Capital  Markets, wrote in a Dec. 12 note to clients.<br /><br />It will take time to  organize and conduct bidding rounds for licenses, and additional  exploration, such as seismic tests, will need to be done, Hallead said.<br /><br />“We are not expecting any significant impact from the reform to be felt in the next two years,” he wrote.<br /><br />Foreign  oil companies will face a backlash from Mexicans opposed to sharing the  nation’s oil wealth, said Ricardo Monreal Avila of Movimiento Ciudadano  Party, who sees the reform as violating Mexico’s constitution. <br /><h2>Local Opposition </h2>“We  are going to see serious problems in the operations of these reforms.  Indigenous communities and places chosen by foreign companies for  extraction will not allow them on their property. There are going to be  serious operational problems.”<br /><br />Brent crude futures, the benchmark  for more than half the world’s oil, rose as much as 1.8 percent to  $110.80 a barrel in London today, the biggest intraday gain in two  weeks, after Libyan rebels refused to relinquish control over oil ports  to the central government. Libya, home to Africa’s largest proven  reserves, has seen output tumble to the lowest since 2011 amid civil  strife.<br /><br />The first assets that will attract foreign investment  will be mature oil fields drilled decades ago and reservoirs that need  injections of steam or carbon dioxide to coax more crude out of the  ground, Medina said. Deep-water prospects, shale and other technically  challenging endeavors will follow later, he said.<br /><br />The level of  investor interest will be partly determined by which assets Pemex  chooses to keep and which it will put up for auction, Medina said. <br /><h2>Chicontepec Price </h2>The  Chicontepec field northeast of Mexico City may be among the richest  prizes Pemex surrenders after its problems overcoming low pressure and  disconnected crude deposits that have limited output, Medina said.  Production that has averaged about 60,000 barrels a day may be increased  to more than 100,000 by an international producer experienced in  handling such fields, he said. <br />Chicontepec is just one of the  over-budget, long-delayed projects for which Pemex will be eager to find  partners, said Jose Antonio Prado, a former general counsel of Mexico’s  energy ministry and Pemex official.<br /><br />“The Mexican state will be  able to incorporate private participants in projects that are already in  force as well as new opportunities,” said Prado, now a partner at the  law firm Holland & Knight LLP in Mexico City. <br /><h2>Deep Water </h2>The  reforms are especially important to open up exploration in Mexico’s  deep-water fields, where additional capital, as well as better  technology and expertise are needed, Carlos Solé, a Houston-based  partner at Baker Botts LLP, said in a telephone interview. Pemex  estimated the country’s deep-water Gulf of Mexico prospects may hold the  equivalent of 26.6 billion barrels of crude.<br /><br />Onshore, the  potential is even greater with more than 60 billion untapped barrels,  according to a Pemex presentation last month.<br /><br />Some of the  potential shale production sits across the border from Texas’s prolific  Eagle Ford formation. The most resource-rich area studied so far is  around the city of Tampico, a coastal city about 300 miles (480  kilometers) south of the bottom tip of the Texas border.<br /><br />“I can’t  tell you the amount of banks and investment funds coming from the U.S.  and Europe that have been talking to us and are trying to have an  expectation of what’s going to happen with the energy reform,” Prado  said. “All those guys are going to be in Mexico next year in various  forms trying to seek new opportunities.” </div></div>

North America to Drown in Oil as Mexico Ends Monopoly

The flood of North American crude oil is set to become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil ...