Mexico: Open For Business

American Association of Petroleum Geologists (AAPG)

Amid the backdrop of a comparatively soft market for the seismic industry in the coming year or so, oil and gas producers are watching Mexico with considerable expectation after the country passed historic constitutional reforms late last year to end the 75-year-old state monopoly on Mexico’s abundant oil and gas resources.

“Yes, Mexico is in the process of opening their oil and gas resource base for foreign investment and exploration,” said AAPG member Chip Gill, president of the International Association of Geophysical Contractors.

The reforms passed Mexico’s Congress in early December and were approved by President Enrique Peña Nieto on Dec. 20, but because they require changes to the national constitution, the reforms have to be approved by at least 17 of Mexico’s 31 state legislatures.

If the reforms are approved, foreign investors would be able to compete with Pemex, the state-run oil and gas company, by entering into “production-sharing” agreements with the Mexican government.

“Mexico is a highly prospective region of the world,” Gill added. “The oil and gas industry is excited about that.”

An Exciting Era?

In particular, he said his constituents within the IAGC are excited because, in an otherwise sluggish global market for their industry this year, seismic contractors are expected to be in high demand in Mexico.

“The government of Mexico is very interested in modern seismic data being acquired and made available to oil and gas companies considering applying for licenses for the right to explore for and produce oil and gas,” Gill said.

But there is still a lot of ground to cover in hammering out regulations for obtaining that data, so decision-makers within the seismic industry will be paying close attention to Mexican policy discussions in 2014.

“The government of Mexico is currently exploring how they should best set up their scheme around – not only permitting and these ground rules … for seismic data, but also the licensing of oil and gas rights themselves,” Gill said.

“They have a lot of other ground rules they have to set up beyond ours, of course, but seismic data is the first stage … Being able to evaluate the subsurface to have a start framing your risk, to identify the areas that might be potential,” he said.

“Also, there’s lag time. It takes a while for us to budget the money, justify the investment, go actually acquire it and process it and get it in the hands of the companies that would want to consider buying a license,” he continued. “So it’s a very significant amount of time. We’re talking years of lead time, especially when you think about the size of the country of Mexico.”

He said there also is the question of what role seismic data already obtained in Mexico will play.

“What about the data that Pemex found?” he asked. “They own seismic data they’ve been acquiring in Mexico over the years. So how does that come into play?

“Again,” he said, “these public policy decisions will affect the seismic sector in some fashion.”

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