The anticipated impact of upstream regulatory reforms in Mexico has prompted the U.S. Energy Information Administration (EIA) to raise its outlook for the country’s oil production. Meanwhile, Petroleos Mexicanos (Pemex) said near-term production reports will show declines due to measurement changes intended to make reporting more accurate.

The recently adopted reforms (see Daily GPI, Aug. 14) are “expected to improve the long-term outlook for growth in Mexico’s petroleum and other liquids production,” EIA said in a note Monday. “Analysis in EIA’s upcoming International Energy Outlook 2014 will include the potential effects on upstream oil exploration and production and the potential for foreign participation. The changes in EIA’s assessment of Mexico’s liquids production profile are profound.”

Last year’s International Energy Outlook projected that production would continue to decline from 3 million b/d in 2010 to 1.8 million b/d in 2025 and then struggle to hold at 2.0-2.1 million b/d through 2040. However, the upcoming Outlook takes into account some expected success in reform implementation. It projects that Mexico’s production could stabilize at 2.9 million b/d through 2020 and then rise to 3.7 million b/d by 2040.

“Actual performance could still differ significantly from these projections because of the future success of reforms, resource and technology developments, and world oil market prices,” EIA said. The change from the 2013 Outlook‘s take on Mexico’s production to what is to be published in this year’s Outlook represents an increase of about 75%.

Since 2008, the contract structure for any private company partnering with Pemex was a performance-based service contract, which offered financial incentives to private contractors working in Mexico’s upstream sector. Recent reforms introduced three new contract types that are intended to offer more opportunity to outside investors in Mexico’s upstream sector. The new contract types offer profit-sharing, production sharing, and licenses to allow participating companies to receive payment in the form of oil or natural gas.

“The production-sharing contracts and licenses will effectively allow foreign companies to account for reserves, which is a particularly attractive incentive for investment in Mexico’s energy sector,” EIA said. “Different contract types will likely be applied according to the degree of risk associated with specific projects. For instance, licenses will likely be used for projects that are very capital intensive and high-risk, requiring advanced technology, like oil shale or ultra-deepwater projects. Less risky onshore and shallow offshore projects would more likely use profit-sharing arrangements.”

However, in the near term data from Pemex is expected to show production declines due to changes in how oil production is measured, Pemex said late last week. The changes are intended to improve the accuracy of production measurement and don’t reflect an actual reduction in oil produced.

For instance, for the period January to July, Pemex reported crude production of 2.466 million b/d and crude distribution of 2.311 million b/d. If losses due to evaporation, product segregation and accumulation of inventories are accounted for, then production without water or measurement distortion for the same period comes out to 2.340 million b/d, Pemex said. Using improved measurement techniques, Pemex projected that production at year-end 2014 without water or measurement distortion will be at least 2.350 million b/d.