Oil Services Sector to Benefit from Mexico Energy Reform
Efforts to reform Mexico’s energy industry are expected to benefit the Mexican economy, state energy company Petroleos Mexicanos (PEMEX) and the oil services industry, but uncertainty remains around the ability of independent oil companies to book reserves.
Private company investments are expected in Mexico’s oil and gas industry by the second half of 2014 and activity to begin in 2015 following the proposed reform of Mexico’s energy industry, said Dr. Duncan Wood, the director of the Mexico Institute of the Woodrow Wilson International Center for Scholars, during a Barclays Capital conference call this week on Mexican energy reform.
The ruling PRI party has the votes needed to pass energy reform but does not want to isolate the opposition in the process, Wood noted. The Leftist opposition is also fragmented and unlikely to present a meaningful impediment.
Mexican President Enrique Pena Nieto unveiled plans to lift a ban on private companies investing in PEMEX Aug. 12, The Associated Press reported. The opening of Mexico for private sector investment is seen as necessary to tap Mexico’s massive deepwater oil and shale gas reserves.
Mexican President Enrique Pena Nieto is seeking to liberalize the nation’s energy industry to reverse and grow new oil and gas production and root out corruption and inefficiencies, Barclays reported, estimating major oil service companies such as Halliburton and ultra-deepwater drilling companies Pacific Drilling SA and Ocean Rig UDW Inc. to be major beneficiaries of Mexico energy reform.
Nieto’s energy reform proposal consists of amendments of Articles 27 and 28 of Mexico’s Constitution to allow private sector participation in the energy sector, in oil and gas and electricity.
“If this proposed passes, we believe it could increase the flexibility of the legal framework in a significant manner,” Barclays noted. “We also think it has a high likelihood of being approved by Congress, given the current political conditions.”
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