Mexico’s Energy Reform: Success Requires Knowledge, Plus Partnership Mindset

American Association of Petroleum Geologists (AAPG)

Mexico has six basins that produce oil and gas, and tremendous offshore, deep Gulf of Mexico resources. There is also shale potential in formations that extend south from the South Texas Eagle Ford. Still, according to statistics released by Pemex, Mexico’s oil and gas production has declined 25% since the 1980s. The problem has stemmed partially from a lack of investment, and difficulties in implementing new technologies to explore for and develop resources.

The need to attract foreign investment was behind the December 2013 decision to break up the state oil monopoly and some analysts have predicted up to $25 billion could flow in, starting with the companies that are currently involved in the Eagle Ford, just across the border.

If you’re a foreign investor, where can you benefit? Probably the safest bet would be to go to Mexico’s established production, such as the Golden Lane (the analogy would be that of companies taking a position in the Permian Basin). Then, focus on enhanced oil recovery, along with exploiting other zones (such as shale) for a “stacked pay” strategy.

The Golden Lane, located in Veracruz and Tampico, was first developed in 1909 which coincided with the Mexican Civil War (1910-20). Most Americans are not aware that the U.S. Marines occupied Veracruz from April - November, 1914. It did not have anything (directly) to do with the development of the Golden Lane, but is an interesting historical fact.

Those who have nerves of steel can turn to the Gulf of Mexico and explore in the complex Perdido fold belt, where Pemex’s Supremus-1 and the Trion-1 are so stunningly promising that they tempt one to name a new field after a science fiction behemoth.

Flowery rhetoric aside, the potential in Mexico is real. Those who take the time to educate themselves and also to maintain a mindset of partnership have an opportunity to get in on the ground floor in different phases of exploration and development, and to develop solid relationships.

There will undoubtedly be many changes as the Energy Reform is implemented, and perhaps even controversy, so it’s very important to seek to establish relationships with knowledgeable partners in Mexico who share the same goals.

Don’t Miss: AAPG’s e-symposium on Mexico’s oil and gas opportunities | August 21 with expert Alfredo Guzman

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