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

Karzai's Legacy: Missed Opportunities?

Afghanistan's president leaves behind a much different nation than the one he inherited, yet his legacy from 13 years in power is getting mixed reviews More

Secret Service Chief Under Fire for White House Security Breach

Julia Pierson faces tough questions from lawmakers after recent intrusion at White House, says: 'It is clear that our security plan was not executed properly' More

Frustrated, Liberian Students Want Ebola Fight Role

Thousands have volunteered to go to counties, rural villages to talk to people in their language about deadly virus 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.
Malaysia Struggles to Stop People Joining Jihadi
X
Mahi Ramakrishnan
September 30, 2014 2:16 PM
Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Malaysia Struggles to Stop People Joining Jihad

Malaysian authorities say militant groups like the so-called "Islamic State" have used social media to entice at least three dozen Malaysian Muslims to fight in what they call "jihad" in Syria and Iraq. As Mahi Ramkrishnan reports from Kuala Lumpur, counterterrorism police are deeply worried about what could happen when these militants return home.
Video

Video Could US Have Done More to Stop Rise of Islamic State?

President Obama says airstrikes against Islamic State militants in Syria will likely continue for some time because, in his words, "there is a cancer that has grown for too long." So what if President Obama had acted sooner in Syria to arm more-moderate opponents of both the Islamic State and the Syrian government? VOA State Department Correspondent Scott Stearns reports from the United Nations.
Video

Video Treasure Hunters Seek 'Hidden Treasure' in Central Kenya

Could a cave in a small village in central Kenya be the site of buried treasure? A rumor of riches, left behind by colonialists, has some residents dreaming of wealth, while others see it as a dangerous hoax. VOA's Gabe Joselow has the story.
Video

Video Iran's Rouhani Skeptical on Syria Strikes

Iranian President Hassan Rouhani expressed skepticism Friday that U.S.-led airstrikes in Iraq and Syria could crush Islamic State militants. From New York, VOA’s Margaret Besheer reports the president was also hopeful that questions about Iran’s nuclear program could be resolved soon.
Video

Video US House Speaker: Congress Should Debate Authorization Against IS

As wave after wave of U.S. airstrikes target Islamic State militants, the speaker of the Republican-controlled House of Representatives says he would be willing to call Congress back into session to debate a formal, broad authorization for the use of military force. VOA’s Michael Bowman reports from Washington, where legislators left town 10 days ago for a seven-week recess.
Video

Video Ebola Patients Find No Treatment at Sierra Leone Holding Center

At a holding facility in Makeni, central Sierra Leone, dozens of sick people sit on the floor in an empty university building. They wait in filthy conditions. It's a 16-hour drive by ambulance to Kailahun Ebola treatment center. Adam Bailes was there and reports on what he says are some of the worst situations he has seen since the beginning of this Ebola outbreak. And he says it appears case numbers may already be far worse than authorities acknowledge.
Video

Video Identifying Bodies Found in Texas Border Region

Thousands of immigrants have died after crossing the border from Mexico into remote areas of the southwestern United States in recent years. Local officials in south Texas alone have found hundreds of unidentified bodies and buried them in mass graves in local cemeteries. Now an anthropologist and her students at Baylor University have been exhuming bodies and looking for clues to identify them. VOA’s Greg Flakus has more from Waco, Texas.
Video

Video Ebola Robs Liberians of Chance to Say Good-Bye to Loved Ones

In Liberia, where Ebola has killed more than 1,500 people, authorities have worked hard to convince people to allow specialized burial teams to take away dead bodies. But these safety measures, while necessary, make it hard for people to say good bye to their loved ones. VOA's Anne Look reports on the tragedy from Liberia.
Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.Colonel Steve ‘Spiros’ Pisanos left Greece and came to the U.S. to learn to fly. He flew fighters for the Allies in World War II, narrowly escaping death multiple times.

AppleAndroid

More Americas News

Recession Looms over Venezuela, Official Data Under Wraps

Empty store shelves, closed factory gates and idled construction projects tell their own story
More

Norway Ranked Best for Older People

HelpAge International releases Global Age Watch Index
More

US Judge Holds Argentina in Contempt Over Bond Payment Plan

In rare move, District Judge Thomas Griesa says country taking 'illegal' steps to evade his orders in longstanding dispute with hedge funds over defaulted debt
More

Brazil's Rousseff Extends Lead Over Silva in Elections

President Dilma Rousseff's expected victory margin over closest rival Marina Silva has surged to 9 percentage points
More

8 Killed in Peru Quake

The victims of the 4.9-magnitude tremor were all from the mountainous community of Misca, where many homes collapsed in the quake
More

S. Africa Gives Cuba $31 Million Economic Aid

South African President Jacob Zuma pledged the money to Cuba in 2010, but its implementation was delayed for several years
More