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Pemex Closer to Outside Investors, says Raymond James

After 70 years as a Mexican government-owned monopoly, Petroleos Mexicanos (Pemex) may be ready to accept allowing energy investors in, Raymond James & Associates Inc. analysts said in a report.

The shift hinges on a delicate political process and potential constitutional amendment (see Shale Daily, Aug. 15).

If Pemex were opened to foreign investment, it could be "transformative for the oil and gas production in Mexico," and stir “ample opportunities” for operators both onshore and in the Gulf of Mexico, said analyst Pavel Molchanov.

Pemex, which fuels a big part of Mexico’s economy, historically has been underfunded and mismanaged, he noted.

"While the political process is by no means [complete] and the timetable remains hazy, President Enrique Pena Nieto's far-reaching oil reform package is a potentially game-changing event," said Molchanov.

Mexico already is one of the top oil producers in the world, but the investment reforms might allow the country to realize its potential in unconventional formations, such as shale gas, as well as in deepwater (see Shale Daily, March 15).

The U.S. Energy Information Administration estimates that Mexico has 545 Tcf of recoverable shale gas and a small, "but still meaningful" amount of unconventional oil (13 billion bbls), which would rank its reserves in the top 10.

"Most of this is attributable to Mexico's portion of the Eagle Ford Shale in the Burgos Basin," said Molchanov.

One of the sticking points is how Pena Nieto's government would eventually implement a constitutional amendment. There is foreign energy investment in Mexico, particularly among oilfield service operators.

However, Pemex does not allow foreigners to own assets. The difference between allowing profit-sharing and production-sharing could be a hurdle, Molchanov noted. Nevertheless, "with net oil exports down 58% over the past decade and dependence on U.S. gas growing, the status quo is clearly untenable.”

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