After years of tight national control over its oil industry, Mexico’s newly announced bid round marked the first tangible signs of a more relaxed attitude to foreign participation. Steps towards international involvement have been small and come in response to declining production and new challenges in exploration.
Reform in government policy has allowed state oil company PEMEX to enter into contracts with foreign companies. This led to an announcement of the first Mexican bid round on March 1, 2011. Only three fields were included in the bid round but further bid rounds that include deepwater developments have been promised. This is a small but encouraging step towards international involvement in Mexico. Pemex has marked this as a ‘new age of collaboration with the international oil industry’
The Mexican Petroleum industry has long been defined by an over-reliance on major oil fields - Cantarell and Ku-Maloob-Zaap (KMZ) - with an underinvestment in exploration. Mexico ranks sixth in the world as an oil producer but declines in production are setting the country on the path of becoming a net importer. Tight regulations meant that Pemex could not enter into risky contracts or production-sharing agreements with private or foreign firms.
Pemex’s focus over the years has been to invest in and exploit its major fields. Cantarell commenced production in 1981 and at one point accounted for about 63% of Mexico’s oil production. In 2004 Cantarell peaked and entered into a steady decline which has forced Pemex and the Mexican Petroleum industry to diversify the country’s oil strategy. In 2008 a significant reform, called the PEMEX Act, was granted by the Mexican government to allow Pemex more leeway on contracts. Pemex can enter into agreements with International Oil Companies (IOCs) through incentive-based contracts. Pemex will have full control of all hydrocarbons extracted and companies will be paid in accordance with field productivity.
Source: Evaluate Energy Ltd
Medium Term Plan
In light of the policy reform and declining production, Pemex has established a Medium Term Plan which aims to increase production to 3 million bopd by 2017. An investment of approximately $215 billion will be allocated to exploration and production efforts from 2010 to 2019. Emphasis will shift away from exploiting major fields, to exploration in the Gulf of Mexico, development of the Southern onshore region and increased production at Chicontepec. Pemex has…
