Mexico: Another Gulf boom?

Seventy-five years ago, Mexico did the unthinkable. It nationalized its oil and gas industry, becoming the first nation to do so. 

Mexico emerged from the 1938 nationalization with energy laws that were restrictive compared to Kuwait, and considered less liberal than in Cuba. The Mexican state-owned oil company Pemex (Petróleos Mexicanos) was spawned from the nationalization. It has produced oil from easy to access sources in shallow Gulf of Mexico (GOM) waters and inland areas that are relatively easy to drill. The process worked well for years. But in 2004, production from Mexico’s largest oil fields, such as the Cantarell field in the Mexican Gulf, began to decline, as did total national production. In the past 10 years, Mexican oil production has fallen by about 25 percent, to 2.5 million bbls. per day.

That may soon change. Mexico is strongly considering plans to end Pemex’ 75-year monopoly of the country’s oil and gas resources, and possibly allowing foreign oil companies to participate in the development and production of an estimated 87 billion bbls. equivalent of oil and gas in the country. Some 27 billion bbls. of that total is projected to exist in GOM deepwater reserves. That compares to nearly 5 billion bbls. for the entire U.S. Gulf, according to Energy Information Administration estimates.

The oil would still belong to the Mexican government, with outside participants receiving cash for their percentage. The companies would also be able to book a percentage of the reserves on their balance sheets.

For the workboat market, this may be a second GOM boom. Some estimate that even if Mexico limits the number of foreign participants, demand for all types of workboats in the Mexican deepwater market could rival U.S. demand within 10 years.

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