News / Americas

Mexico Opens Energy Sector, but Investors May Hesitate

Expectations May be Too High for Mexico Energy Reformsi
X
Greg Flakus
August 14, 2014 10:29 PM
This week, Mexican President Enrique Pena Nieto, signed into law changes to his country’s energy sector, opening it to private investment for the first time since it was nationalized in 1938. Investors around the world are watching closely, however, looking for more details on how the plan may work. VOA’s Greg Flakus has more from Houston.
Greg Flakus

Mexican President Enrique Pena Nieto signed into law on August 11 a number of changes to his country’s energy sector that are designed to open it to private investment for the first time since it was nationalized on March 18, 1938. That day is celebrated in Mexico as a national holiday and many Mexicans are opposed to reform. Without outside help, though, Mexico’s oil production will continue to fall.

As output from Mexico’s main oil fields has dropped, the country’s future prosperity has become cloudy. That is why Pena Nieto made energy reform a priority and convinced lawmakers to act.

“The vast majority of Mexicans should receive the benefits that this transformative reform will bring,” he said.

Previously, national oil company Pemex controlled all energy exploration and production, with foreign companies sometimes working under contract to provide services. Now, foreign oil companies can participate in some joint ventures and bring their expertise to Mexican fields.

Hurdles remain

George Baker, who runs the newsletter Mexico Energy Intelligence, said energy companies in Houston and elsewhere are being cautious about the reform.

“Mexico is a very Pemex-centric country, and as such, there is built-in resistance to change. The government has very high expectations, private industry is more on the side of wait and see,” he said.

The success of the reform is critical for Mexico as its oil production of 3.4 million barrels a day has now slipped to 2.5 million barrels. Mexico, which borders the booming shale gas fields in Texas, imports natural gas because it lacks the technical expertise to fully exploit its own fields. Baker said government officials are determined to change that.

“The government believes it has the fourth largest shale gas endowment in the world and they are saying, ‘why are we paying high prices for gas when we have this great endowment?’” he said.

Much of the oil produced by the United States now comes from offshore operations in the U.S. zone of the Gulf of Mexico, but Baker said there is very little activity in the Mexico zone.

“The Mexican side of the Gulf of Mexico is the largest unexplored petroleum province on the planet, perhaps outside the North Pole,” he said.

Baker said big oil companies like Exxon-Mobil and Shell could transform that zone, which has many advantages over the North Pole in climate, nearby infrastructure and easily accessible services. He said Mexico must compete for investment money with projects in U.S. fields, however, which now are the most competitive energy players in the world. He said if a major oil company develops a project in Mexico, it might encourage others to follow.

Security issues

Another problem is security. Mexico political expert George Grayson, who teaches at the College of William and Mary in Virginia, said violent drug cartels could threaten the energy industry.

“Los Zetas, which are the most sadistic members of cartels in Mexico, have tapped into oil and gas pipelines, and I wonder if the foreign investors are going to be willing to go into northern Mexico where Los Zetas and other cartels operate,” said Grayson.

Lack of sufficient water in some northern areas also could impede operations there, he said, noting that Mexico’s state and federal government agencies, which have operated for decades in a closed, nationalized system, may not meet international standards.

“There is going to have to be a great deal of beefing up of the regulatory system if the Mexicans hope to deal evenhandedly with foreign investors, who, of course, can afford to purchase the best talent in the world,” said Grayson.

Mexican officials say they are moving quickly to implement changes as they prepare for the first round of private investment bids. Both Texas A&M University and the University of Texas are developing projects with Mexican universities to educate more Mexican petroleum engineers. But experts say Mexico would benefit from hiring experienced people from around the world who could bring new perspectives to the country's currently non-diverse energy work force.

 

 

You May Like

Could Nemtsov Threaten Putin in Death as in Life?

Dynamic and debonair opposition leader had supported liberal economic reforms, criticized Russian president's aggression in Ukraine More

Oil Smuggling Highlights Challenges in Shutting Down IS Finances

Pentagon spokesman says Islamic State 'certainly continues to get revenue from the oil industry black market' but that airstrikes have made a dent More

India Focuses on Infrastructure, Investment to Propel Economy

Government expects economy to grow at 8 to 8.5 percent in next fiscal year More

This forum has been closed.
Comment Sorting
Comments
     
by: Joseph linck from: Brownsville, tx
August 19, 2014 1:01 AM
Much of Mexico's side of the Eagle ford, is a bread basket with irregated farms. Oil companies will hv no trouble buying water from farmers. They are also experienced in dealing with security problems in the middle East, Africa, etc. Mexico will present no special problem for them

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

More Americas News

Video US, Cuba Make Progress in Restoring Diplomatic Ties

Friday's session focuses solely on opening embassies in Washington and Havana as quickly as possible
More

Mexico Arrests Drug Lord 'La Tuta'

Mexican federal police captured Knights Templar drug cartel leader Servando 'La Tuta' Gomez, one of the country's most wanted fugitives
More

Embassy Reopenings Top Americans' List in Cuba Talks

Cuba has said it will be linking embassy issue to whether US drops it from State Department's list of sponsors of terrorism
More

Argentina Passes Bill to Revamp Spy Agency After Prosecutor's Death

President Cristina Fernandez says new state security body will be more accountable but government opponents say legislation does little more than change name of spy agency
More

US, Cuba Set for 2nd Round of Talks on Diplomatic Ties

Negotiations in Washington, which follow initial meeting in Havana in January, to include discussion on reopening embassies
More

Obama Defends Immigration Plan

During Town Hall at Spanish language station Telemundo in Miami, US president insists he was within his rights to protect undocumented immigrants from deportation
More