| | | This is a significant development for the Major Integrated oil companies. It has been a long time coming, like a very large, slow train. The Cantarell supergiant field has been slowly watering out now for years, placing Mexico on an ever-tightening budget basis with respect to their oil revenue.
The prospect of an under-appraised region such as this SW'n part of the GOM being up for grabs, at this particular moment, is very significant. Many of these major companies are smarting from their experience in Latin America - in Venezuela - CVX is still hemorrhaging money there, Exxon won a pittance in arbitration, Conoco has pulled out, etc etc. Quite a few drillers and service companies still have equipment locked up there (H&P, Tidewater, etc). And in Brazil, where companies are forced to partner with Petrobras, a terrible combination of insular government-run bureaucracy and arrogance (they are extremely difficult to partner with).
The point is, with Mexico they have a friendly neighbor with analogous prospects to the ones they are already producing from in the GOM. The subsalt potential, which has already been explored in Brazil with crashing success, is still maturing in the GOM region. You can bet that the majors have been wooing and laying groundwork here for years for an entry. American service companies like Baker and Halliburton have already been providing expertise and full-field management solutions here, again for years.
In addition, Mexico could become the location (my prediction) to a modern refining industry, as a welcoming host. Most of the stakeholders with positions in refining here in the US are moaning about the age, limited size, and most importantly, restrictive policy/regulatory environment that prevents them from expanding capacity and infrastructure in order to be able to accommodate the new production coming in from the USA fracking boom.
With Mexico bordering the US, it's not hard to envision a lot of this production going a little further south to be refined and then sent to market.
One thing to remember: Oil is still a product that is a whole lot easier to manage than gas. With all of this oily production heating up here at home, some of these LNG mega-investments might start to look like green fruit at the top of the tree by comparison. Shell might be starting to wonder if Prelude is really such a good idea after all....
Positions in CVX, COP, XOM, KMI/P, EPD, ENB, RIG, SDRL, all of them long term.
Regards to all
Aggie |
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