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Mexico energy reforms may prove beneficial to U.S. energy companies

31st January 2014

Mexico's energy developments will make "abundant opportunities" for U.S. energy companies will decrease the socioeconomic differences between Texas' metro areas and its border cities, reveals research by BBVA Compass

Pemex currently has six oil refineries in Mexico

Mexico's energy reforms will make "abundant opportunities" for U.S. energy companies and decrease the socioeconomic differences between  metro areas in Texas and its border cities, reveals the latest BBVA Compass research.

BBVA Compass economist, Marcial Nava, wrote in his report on the reforms that "The 2013 reform promises to create abundant opportunities for private companies that have the technology and expertise to revive Mexico's hydrocarbons and electricity industries."

Under the reform, the state would retain ownership of hydrocarbons beneath the surface and Petroleos Mexicanos (PEMEX) and Comision Federal de Electricidad (CFE) would not be privatized.

BBVA Compass has assessed that the reform could increase private direct investment inflows into Mexico by $20 billion to $30 billion per year, which is about 1.5 to 2.3 per cent of Mexico’s gross domestic product (GDP).

PEMEX will have the right to determine what acreage it wants, and the Energy Ministry (SENR) will determine if PEMEX can keep assets based on their technical and financial resources to develop them.

Mexico is estimated to have the sixth largest technically recoverable reserve of shale gas and the eight largest technically recoverable reserve of shale oil in the world, but its deepwater and shale reserves are literally unexplored.

BBVA Compass noted that the country has less than 5 per cent of total deep water rigs in the Gulf of Mexico, while in 2012 it authorized the drilling of 3 shale oil and gas wells.

Some of the major oil companies that could be prove to be immediate candidates in Mexico’s deepwater following the reform include Exxon Mobil Corp., BP, Chevron Corp., Hess Corp., and Anadarko Petroleum Corp.

Oilfield service companies that could profit from deepwater activity include Diamond Offshore Drilling Inc., FMC Technologies, Seadrill Ltd., Transocean Ltd., Baker Hughes Inc., Schlumberger Ltd. and National Oilwell Varco.

Nava forecasts the reforms will pump around $1.2 trillion to the Texas-Northern Mexico region in the next decade.

He added, "If these border towns effectively seize the opportunity, the U.S.-Mexico border could see one of the most dramatic transformations in its history."



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