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Mexico’s emerging infrastructure opportunity

Hydrocarbon Engineering,

According to EY, reform of Mexico’s energy industry represents an historic opportunity for oil and gas companies.

In a recent report, EY explains why the opening of Mexico’s energy sector to foreign investment could not have come at a better time. Foreign investment in manufacturing, especially in the automobile industry, has created more than 100 000 jobs since 2010. And while overall growth has slowed during the recession, many experts believe that energy reform can play a major role in further developing Mexico’s economic clout.

Although the proposed energy related reforms will impact all areas of the oil and gas value chain, most US based energy companies are focused on gaining access to Mexico’s energy reserves. Pemex says that the companies reserves are approximately 50 billion boe, with another 60 billion in unconventional resources.

Economic indicators suggest that Mexico’s decline in oil production is the result of a lack of investment and technology, rather than geology, according to EY. Consequently, the Mexican government has placed a significant bet on Mexican energy reform. The Mexican government is looking for direct investment of approximately US$ 350 billion in the next five years from outside the country to reinvigorate domestic energy production. The conservative goal is to generate a rise in GDP of approximately 1%/y in the early stages of reform, roughly equivalent to increased economic output of approximately US$ 12 billion.

Foreign involvement in Mexico’s exploration and production (E&P) activity is expected to be focused first on deepwater and mature fields that are in need of further investment, as well as new technology to spur production. The opening of unconventional projects, especially onshore shale plays, is likely several years away.

Adapted from a report by Emma McAleavey.

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