Campbell: Mexico Is A Long Way from Opening Its Oil Sector

Campbell: Mexico Is A Long Way from Opening Its Oil Sector


NEW YORK, July 29 (Reuters) - Everyone is getting excited that the Mexican government may open up the nation's oil sector to foreign companies, but a dose of realism ought to temper the bullish sentiment.

The reason for the buzz is clear: Mexican politicians are now openly discussing radical change to the country's highly restrictive oil and gas legislation.

But talk and action are two very different things.

The last time this happened was several years ago. Between 2007 and 2008, then-President Felipe Calderon urged the Mexican Congress to adopt legislation that would allow state oil monopoly Pemex to offer bonuses to private companies working as contractors.

The idea was that the bonuses, while not tied to oil prices or reserves, would somehow be enough to bring in foreign capital and expertise to develop Mexico's hitherto largely untouched deepwater oil and gas reserves. But as talk surrounding the reform died down and the hard work of implementing the changes began very quickly, Calderon's policy revealed itself as a less-than-radical change.

It was not until late 2011, when Calderon had less than a year of his six-year presidential term left, that the first service contracts were signed for three small oil fields. No big bang in deepwater has happened. No radical change in the Mexican oil sector.

The reasons why Calderon's reforms were watered down are complex, and there is hope that the opposition that stymied his efforts to greater private-sector participation has abated over the last few years. But roadblocks to reform remain.


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JR | Jul. 30, 2013
Robert Cambell is being very generous with his ten year development of an offshore prospect and even more generous with the probability of opening up Mexico to anything remotely acceptable to international oil companies. Shell received some of those "operational service contracts" and only considers them a gamble if Mexico ever (read that 30 years or more) opens up to outside companies. Shell is losing money on the ganble but they have determined it good for the future prospects of Shell to hang in their, at least for now,. on a present losing bet. Mexico is indeed rich in natural resources but the government and power politics in Mexico will prevent it from efficient recovery unless Mexico does indeed, one day, open up its natural resource industry to international expertise and at lease Joint Ventures. Even those JVs will not happen with the Mexican government relying on PEMEX to supply most of its PEMEXs profit to the government, thus leaving nothing for PEMEX to develop expertise, fields, production or anything else. The best thing Mexico could do is allow PEMEX to operate as an Independent oil company and simply tax the company. It would allow the government to continue to receive revenue, although best a a lower rate for PEMEX so PEMEX can survive on its own and JV with others to gain the funds and expertise it son badly needs.. Mexico is simply milking PEMEX dry. As long as the cow gives milk Mexico will such it inside out over the decades and eventually be left with very low PEMEX revenues. Then Mexico may be ready to "open" up to increase its reveneues, even if from taxes on a foreign company theu JVs with PEMEX.


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