Happy Thanksgiving to everyone. One of the most emergent opportunities for oil is Mexico. This article gives a snapshot of some aspects within this present. These points are for later fact checking
Mexico Shrugs Off OPEC as Exxon to Chevron Line Up to Bid
By Rebecca Penty and Adam Williams Nov 25, 2014 11:01 PM CT
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As OPEC ponders ways to prop up crude prices, Mexico is staying focused on a long-term plan to open its state-controlled oil industry to foreign producers.
The Latin American country is scheduled to outline terms of its first auction of oil blocks to outside bidders since 1938 this week, even as a price rout has Organization of Petroleum Exporting Countries weighing whether to adjust volumes. Any move from the countries that produce 40 percent of global supplies this week is months to years away from a Mexican oil revival taking hold.
Companies planning an incursion into Mexico as a 76-year state monopoly ends can look past four-year low crude prices. Exxon Mobil Corp. (XOM), Chevron Corp. and BHP Billiton Ltd. are sharing research with state-owned Petroleos Mexicanos as the government seeks $50 billion in private investment mostly in undeveloped deepwater offshore fields and onshore shale by 2018.
“There is still going to be a significant level of foreign investment because it’s a jurisdiction, a geography that’s been untapped by the outside world,” said Carlos Sole, a partner at law firm Baker Botts LLP in Houston. “Companies will look at longer-term price forecasts and longer-term investment needs.”
OPEC countries meet tomorrow in Vienna to assess the group’s collective output, after crude fell into a bear market amid the highest U.S. oil output in more than three decades and signs of slower demand growth. Speculation that OPEC’s leading producers are focused on maintaining their market share rather than shoring up prices has added to declines.
Price RoutU.S. crude continued its slide yesterday to $74.09 a barrel, the lowest settlement since September 2010 and 33 percent less than a June high, after discussions between Venezuela, Saudi Arabia, Mexico and Russia failed to result in a pledge to lower output in advance of the broader OPEC meeting. Brent fell to $78.33.
Mexican Energy Minister Pedro Joaquin Coldwell raised the need for dialogue and the exchange of information among important oil producers at yesterday’s meeting, and the ministers agreed to meet again in February 2015, according to a statement by the country’s government. Mexico and Russia aren’t OPEC members.
“Irrespective of what happens in OPEC and in the weeks and months to come, Mexico has its own issues to deal with in trying to recapture oil volume growth lost over a decade,” said Vincent Piazza, senior energy analyst at Bloomberg Intelligence in Princeton, New Jersey. “This is about trying to turn a tide of declining oil production.”
Declining OutputMexico’s oil output has dropped for 10 straight years amid falling investment in aging fields. The country will produce 2.35 million barrels a day of oil in 2014, 29 percent less than in 2004, according to the state producer known as Pemex. The government is seeking to increase output 500,000 barrels a day by 2018.
While Mexico’s energy reforms won’t be hindered by the oil price decline, the pace of production gains may be less than expected if companies curb offshore drilling plans because they have less cash to spend, said Pavel Molchanov, an analyst at Raymond James & Associates Inc. in Houston.
“I’m sure that we will see companies curtailing their spending in the Gulf of Mexico in the U.S.,” Molchanov said. “It would be logical that they follow the same approach with regard to any potential investment in the Mexican portion of the Gulf.”
The oil price decline hasn’t restricted Pacific Rubiales Energy Corp.’s access to $1 billion it has ready to invest in Mexico, spokesman Peter Volk said this week. The Bogota-based producer plans to double Mexican oil output by 2020.
Pursuing OpportunitiesPatrick McGinn, a spokesman for Exxon, said in an e-mail that the company will pursue potential opportunities in Mexico that are globally competitive. Kent Robertson, a spokesman for Chevron, didn’t return requests for comment. Jaryl Strong, a spokesman for BHP, declined to comment.
Producing from deepwater offshore fields that are among 169 blocks Mexico is auctioning next year would be profitable at current prices and shallower regions are cheaper to develop, said Marco Oviedo, chief Mexico economist at Barclays Plc. Oviedo predicted the price drop will have “very little impact” on development.
Current production in Mexico is profitable at even lower prices. Pemex, with the majority of output from shallow waters and onshore fields, can produce oil for $22 per barrel, Chief Executive Officer Emilio Lozoya said in an interview last month.
“The short-term impact of oil prices will not divert us from making long-term decisions,” Lozoya said.
To contact the reporters on this story: Rebecca Penty in Calgary at rpenty@bloomberg.net; Adam Williams in Mexico City at awilliams111@bloomberg.net
To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net; Susan Warren at susanwarren@bloomberg.net Carlos Caminada, Iain Wilson
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