Mexico remains the third-
largest source of foreign oil for the United States after Canada and Saudi Arabia. But the country’s easy-pump crude is quickly running dry, and the company lacks the technology and know-how to drill for the vast stores of tougher-to-reach deposits that are thought to exist beneath Mexico’s deserts and seas.
Fixing the company, formally known as Petroleos de Mexico, has become a top priority for Mexico’s new president, Enrique Peña Nieto. With an overhaul plan expected by late summer, U.S. and other global energy companies are waiting to see whether Mexico will once more give outsiders a crack at the country’s hydrocarbon treasures, including the massive, virtually untapped beds of shale gas south of the Texas border.
At issue is whether Mexico will embrace the prosperous state-managed model adopted by countries such as Norway and Brazil — where national oil companies can partner with foreign firms and sell shares to investors.
The U.S. Energy Information Administration calculates that Mexico’s gas deposits are the fourth largest in the world, with the potential to ensure decades of low-cost energy and give manufacturers an additional incentive to invest in Mexico over places such as China.
For now, though, Mexico’s oil exports to the United States are falling, dropping below the million-barrel-per-day mark for the first time since 1994.
For those pushing for change, the challenge is as much political as it is technical. The Mexican constitution essentially blocks the country from forming joint-
venture partnerships with outsiders, and analysts say such restrictions will need to be scrapped if the country wants to attract foreign drillers.
Priority for Peña Nieto
For Peña Nieto, who began his six-year term in December, opening up the energy industry is the most ambitious task on a hefty to-do list that includes fixing the education system, telecommunications and tax collection, areas viewed as major hurdles to Mexico’s development into a more modern, democratic, middle-class society.
Peña Nieto has placed a confidant, Emilio Lozoya, at the head of Pemex, even though the 38-year-old former investment fund manager had never run an oil business. And the president insists that the goal is the “modernization” of the company, not its privatization, as opponents allege.
“This is about a practical reform that will allow for the introduction of new technology, which we lack, and accelerate the growth of our energy resources in order to lower electricity costs for Mexican families and businesses and give us a more dynamic energy industry,” Peña Nieto said in a speech to commemorate the 75th anniversary of Oil Expropriation Day.