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

Video Video Claims to Show Shi'ite Forces in Iraq Executing Sunni Boy

While not yet independently confirmed, brutal killing already has gotten attention of Islamic State followers on social media More

After Six Years, Little Change for Niger Delta's Former Militants

Nigerians who laid down arms in exchange for government amnesty subsidies fear program may end with upcoming presidential elections More

Vietnam Pushes for More Educated Drivers to Curb Road Deaths

Transportation officials hope that making a greater effort to get drivers to learn the rules of the road will reduce fatal crashes 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.
NASA Spacecraft Approaches a Dwarf Planeti
X
George Putic
March 04, 2015 8:51 PM
NASA’s Dawn spacecraft will make history on Friday, March 6, when it becomes the first man-made object to orbit a dwarf planet named Ceres. It is located in the asteroid belt between Mars and Jupiter, almost 500 million kilometers from Earth. Among other objectives, Dawn will try to examine two mysterious bright white spots detected on the planet’s surface. VOA’s George Putic has more.
Video

Video NASA Spacecraft Approaches a Dwarf Planet

NASA’s Dawn spacecraft will make history on Friday, March 6, when it becomes the first man-made object to orbit a dwarf planet named Ceres. It is located in the asteroid belt between Mars and Jupiter, almost 500 million kilometers from Earth. Among other objectives, Dawn will try to examine two mysterious bright white spots detected on the planet’s surface. VOA’s George Putic has more.
Video

Video Young Muslims Radicalized Online

Young Muslims are being radicalized ‘in their bedrooms’ through direct contact with Islamic State or ISIL fighters via the Internet, according to terror experts. There are growing concerns that authorities and Internet providers are not doing enough to counter online extremism - which analysts say is spread by a prolific network of online supporters around the world. Henry Ridgwell reports from London.
Video

Video African Americans Recall 1960's Fight For Voting Rights

U.S. President Barack Obama and thousands of people will gather in the small southern U.S. city of Selma, Alabama, Saturday, March 7th to commemorate the 50th anniversary of a historic voting rights march that became known as “Bloody Sunday." VOA’s Chris Simkins traveled to Alabama and introduces us to some of the foot soldiers of the voting rights struggles of the 1960’s.
Video

Video Positive Messaging Transforms Ethiopia's Image

Ethiopia was once known for famine and droughts. Now, headlines more often point to its fast-growing economy and its emergence as a regional peacemaker. How has Addis Ababa changed the narrative? VOA's Marthe van der Wolf reports.
Video

Video Cyber War Rages Between Iran, US

A newly published report indicates Iran and the United States have increased their cyber attacks on each other, even as their top diplomats are working toward an agreement to guarantee Iran does not develop a nuclear weapon and to free Iran from international sanctions. The development is part of a growing global trend. VOA’s Al Pessin reports from London.
Video

Video Answers Elude Families of MH370 Passengers

For the families on board Malaysia Airlines flight MH370, an airline official’s statement nearly one year ago that the plane had lost contact with air traffic control at 2:40 AM is the only thing that remains confirmed. William Ide reports.
Video

Video Land Disputes Arise Amid Uganda Oil Boom

Ugandan police say there has been a sharp increase in land disputes, with 10 new cases being reported each day. The claims come amid an oil boom as investors appear to be cashing in by selling parcels of land to multiple buyers. Meanwhile, the people who have been living on the land for decades are chased away, sometimes with a heavy hand. VOA's Serginho Roosblad reports.
Video

Video In Russia, Many Doubt Opposition Leader's Killer Will Be Found

The funeral has been held in Moscow for Boris Nemtsov, the opposition leader who was assassinated late Friday just meters from the Kremlin. Nemtsov joins a growing list of outspoken critics of Russia under the leadership of President Vladimir Putin who are believed to have been murdered for their work. VOA’s Daniel Schearf reports from Moscow.
Video

Video Simulated Astronauts Get Taste of Mars, in Hawaii

For generations, people have dreamed of traveling to Mars to explore Earth's closest planetary neighbor. VOA's Mike O'Sullivan reports that while space agencies like NASA are planning manned missions to the planet, some volunteers in Hawaii are learning how humans will cope with months in isolation on a Mars base.
Video

Video Destruction of Iraq Artifacts Shocks Archaeologists

The city of Mosul was once one of the most culturally rich and religiously diverse cities in Iraq. That tradition is under attack by members of the Islamic State who have made Mosul their capital city. The Mosul Museum is the latest target of the group’s campaign of terror and destruction, and is of grave concern to archaeologists around the world. VOA’s Kane Farabaugh reports.
Video

Video Smartphones May Help in Diagnosing HIV

Diagnosing infections such as HIV requires expensive clinical tests, making the procedure too costly for many poor patients or those living in remote areas. But a new technology called lab-on-a-chip may make the tests more accessible to many. VOA’s George Putic reports.
Video

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials have expressed concern over reports of a crackdown on Afghan refugees in Pakistan following the Peshawar school attack in December. Reports of mass arrests and police harassment coupled with fear of an uncertain future are making life difficult for a population that fled its homeland to escape war. VOA’s Ayesha Tanzeem reports from Islamabad.

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

Brazil's Rousseff Races to Contain Congressional Revolt Over Austerity

President meets with legislative leaders from her coalition after they unexpectedly reject presidential decree to raise payroll taxes, help close large budget gap
More

Prosecutor Appeals Dismissal of Complaint Against Argentine Leader

President was accused, by investigator later found dead, of trying to whitewash Iran's alleged involvement in 1994 Buenos Aires bombing
More

Maduro Reprisal Could Clog US Visa Process in Venezuela

President's order to slash US embassy staff will hit consular section, which in 2014 processed 232,500 applications
More

Mexico Captures Zetas Drug Kingpin in Another Blow to Cartels

Arrest is second high-profile capture of a kingpin in past week and a boost to President Enrique Pena Nieto's efforts to battle organized crime
More

Colombia Detains China Cosco Shipping Vessel Over Illegal Arms

The detained vessel, operated by Cosco Shipping Co Ltd, was headed for Cuba when it was stopped; the illegal cargo was detected during an inspection
More

Weapons Found on Chinese-Flagged, Cuba-Bound Ship

Authorities in Cartegena, Colombia, detained ship Saturday; captain faces trafficking charges
More