Mexico’s oil industry is finally, mercifully ready to open for business

posted at 6:31 pm on June 8, 2014 by Erika Johnsen

While the United States’ oil and gas industry has lately been going absolutely gangbusters, Mexico’s oil production has been declining over the past decade — and it isn’t very difficult to figure out why. The state-owned oil company Petroleos Mexicanos, a.k.a. Pemex, was founded in the 1930s and has precluded foreign as well as private investment into the development of Mexico’s considerable oil and gas reserves throughout most of its history. The prevailing populist/socialist-ish sentiment that tends to look on said foreign and private investment as little better than plunderage of The People’s natural resources has kept the industry from following in the United States’ footsteps, but as President Peña Nieto put it when signing the legislation removing these self-imposed economic shackles last December, “we’ve decided to overcome the myths and taboos to take a great leap into the future” — and that time is almost nigh. Via the Washington Post:

Pemex has always functioned as an arm of the state. It’s the biggest Mexican company and the country’s biggest taxpayer. In the final quarter of 2013, Pemex paid 50 percent of its revenue — $16 billion — in taxes to the federal government, which uses the state-owned company to fund a third of its budget. Pemex posted a loss of $5.8 billion for the quarter, bringing its total loss for 2013 to $13 billion. It lost $2.74 billion in the first quarter of 2014. …

Edgar Rangel of Mexico’s National Hydrocarbons Commission, which oversees and regulates oil exploration, predicts that the opening of the country’s energy industry will bring in up to $30 billion of foreign investment annually and create as many as 2 million jobs.

The law’s approval prompted Moody’s Investors Service in February to raise Mexico’s credit rating one level to A3 from Baa1, saying it will help add about one percentage point to the country’s annual gross domestic product growth by 2018. …

For foreign oil giants such as Chevron, Exxon Mobil and Royal Dutch Shell, it means gaining access to untapped oil reserves that Pemex says could total 113 billion barrels, including 26.6 billion in the deep waters of the Gulf of Mexico. The reserves are worth $11 trillion.

And the Energy Information Administration estimates that Mexico has at least the sixth-largest shale gas reserves in the world, which — with a little innovative technological/financial help — could help fuel a shale boom of their own.

Mexico’s Congress still needs to pass the secondary legislation that will officially open up the country’s industry, and Pemex and its powerful union are still acting a little cagey on just how much freedom they want these new investors and companies to have, but once everything gets sorted out, the industry should be ready for business sometime later this year — and this is exactly the kind of introduction to more economic and business freedom that Mexico sorely needs.


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Right, and they wont seize all of that Foreign investment money in 10-15 years when they see all of those $$$ signs and the oil industry thriving.

Johnnyreb on June 8, 2014 at 6:46 PM

“I decree less oil and more illegals”…Barry The Boy King

AppraisHer on June 8, 2014 at 6:55 PM

So they take care of all the little muchachoes w?

davidk on June 8, 2014 at 6:57 PM

You can pour billions of dollars of investment money into Pemex, but will the investors have any say in how lousy Pemex is run?

There was a program on some cable station years ago where a New Jersey wiseguy was asked about the State of NY’s success in running para-mutual gambling. He sighed, and replied that running a gambling operation is like running a printing press, yet the State of NY has continually managed to lose money year after year.

I fear Mexico has the same problem. Because it is a political organization, it is chock full of sinecures, relatives, gold bricks and whole forests of dead wood. Like any bureaucracy anywhere else on the planet, there is zero accountability and it will continue to run as a pension qualification program rather than a money making business.

Reuben Hick on June 8, 2014 at 7:06 PM

I know where they can find millions of workers for the new jobs this should create.

Charlemagne on June 8, 2014 at 7:21 PM

I don’t care about mexico or their people anymore. The illegals, liberals, and progressives have squashed that right out of me. I don’t care what they do for business either, I just want them to take their scummy illegals back and secure the northern mexican border, then I might gain an ounce of respect or caring for them that I lost years ago.

Otherwise —–> Middle finger to the lot of them.

Diluculo on June 8, 2014 at 7:24 PM

Mexico’s Congress still needs to pass the secondary legislation that will officially open up the country’s industry, and Pemex and its powerful union are still acting a little cagey on just how much freedom they want these new investors and companies to have, but once everything gets sorted out, the industry should be ready for business sometime later this year

The original legislation was signed in December, yet Mexico’s congress still hasn’t passed the secondary legislation 6 months later. I wouldn’t get my hopes up about that “later this year” estimate.

xblade on June 8, 2014 at 7:28 PM

One of the surest ways to stop illegal immigration into the US is better economic prospects in Mexico. So…Bravo!

tdarrington on June 8, 2014 at 7:31 PM

I know where they can find millions of workers for the new jobs this should create.

Charlemagne on June 8, 2014 at 7:21 PM

Only when you can pry them from the Dems cold, dead fingers…

Kraken on June 8, 2014 at 7:32 PM

Does this mean they are going to quit exporting their indigenous brown faces?

Murphy9 on June 8, 2014 at 7:35 PM

11 trillion dollars? If that secondary legislation gets signed, then when the full weight of Obamacare hits next year, Mexico just might have an illegal gringo problem.

Wisdom_of_Homer on June 8, 2014 at 7:40 PM

Sounds like a good time to finally annex Mexico … and make it our 58th state.

ShainS on June 8, 2014 at 7:56 PM

Mexico’s oil production has been declining over the past decade — and it isn’t very difficult to figure out why.

10 years ago I worked for a company that used a lot of electro-conductive coatings, basically paint that conducts electricity for circuit boards, mobile radar systems and electro-static speakers. The US company that we used was forced out of business by the state government of NY because the stuff was toxic and they were creating a superfund site by dumping the industrial waste in a marsh, so we had to find someplace where no one cared about superfund sites; we looked to Mexico.
We had to bribe the property owners (because by law Americans can’t own property there) to get a usable space, we had to bribe the state run electric company to get power, we had to bribe the state run water company to get water and the state run sewer company to get hooked up to the sewer. We had to pay the police protection money, we had to bribe the employment agencies to provide us with help that didn’t spend all day playing with matches, we had to bribe the politicians to get the permits, the truck drivers to deliver the raw materials, the truck drivers to pick up the materials and the sanitation officials to take away the garbage. When we were done bribing we had to start again at the beginning and keep the bribe machine going. The punch line is that we never got usable product out of the operation because the quality control was lousy and one of the employees was having raw copper delivered to the scrap yard, taking a kickback from the vender, a kickback from the transport company and selling the copper as scrap.
The almost laughable state corruption in Mexico is why they have no industry and why their people flee here.

V7_Sport on June 8, 2014 at 7:56 PM

Sorry. Just had to say this…. Watching the NBA pre-game… The 4 commentators were black lady, black man, white man and a neuter. Lord help me. I am such a bigot.

PaCadle on June 8, 2014 at 8:01 PM

Let’s see how long it takes the Chinese to get in there and how Barry and his minions will try to keep the U.S. out.

COgirl on June 8, 2014 at 8:40 PM

One thing Mexico does have to do before it gets any shale drilling going — aside from getting its Congress to approve the final legislation — is to get the border areas south of Laredo and Eagle Pass secured.

The Eagle Ford shale zone extends south in that area, so getting the infrastructure to Mexico is merely a matter of driving it across the border and setting up the yards, water stations, tank batteries, pipeline infrastructure and workforce housing to handle operations. But if the border drug gangs are continued to be allowed to basically control those areas U.S. companies are going to be wary of sending their equipment and upper level workers into the country, out of fears of thefts, kidnappings or worse.

There’s still a ton of the Eagle Ford to drill in Texas, to the point the companies may now have the freedom to drill in Mexico, but even with the likely lower wages workers would get there, it’s not going to be worth the effort if your materials, crews and even the oil taken out of the ground keep disappearing into the hands of the cartels.

jon1979 on June 8, 2014 at 8:44 PM

King Barky the Liar, the Hollywood Illiteratia, and all of the ruling elite of Mexico and the USA will see what they can do about this.

They will stop it. Mark my words.

jukin3 on June 8, 2014 at 8:51 PM

I worked as a consultant for Pemex back in the early 80′s.
It was the most astoundingly corrupt ‘company’ at every level.

I couldn’t get anything done, finally ‘hired’ someone within the company to ‘facilitate’ for me.
Bribes were laughingly small.
AFTER I flew home, I wrote my report which was rejected with a threat and no payment, because I dared tell them the truth about the technical problem they were having.

It’ll be Amerikka soon.

Tard on June 8, 2014 at 9:25 PM

I know where they can find millions of workers for the new jobs this should create.

Charlemagne on June 8, 2014 at 7:21 PM

Rick Perry says if this goes as planned it may very well solve our illegal immigrant problem.

Grammar Nazi on June 8, 2014 at 10:14 PM

I know where they can find millions of workers for the new jobs this should create.

Charlemagne on June 8, 2014 at 7:21 PM

…I know where they can get some child labor…even cheaper!

KOOLAID2 on June 8, 2014 at 10:37 PM

I know where they can find millions of workers for the new jobs this should create.

Charlemagne on June 8, 2014 at 7:21 PM

Job opportunity in Mexican oil industry should help reverse illegal immigration to the U.S.

sohumm on June 9, 2014 at 5:44 AM

I don’t care about mexico or their people anymore. The illegals, liberals, and progressives have squashed that right out of me. I don’t care what they do for business either, I just want them to take their scummy illegals back and secure the northern mexican border

Illegal aliens invade the US and take jobs from Americans.

Illegal immigration activists are unreasonably aggressive, which making their amnesty push very annoying.

sohumm on June 9, 2014 at 6:00 AM

The almost laughable state corruption in Mexico is why they have no industry and why their people flee here.

V7_Sport on June 8, 2014 at 7:56 PM

This is true of every Latin American country. They are run as private fiefdoms for a very few powerful, connected elite. Latin Americans in general have no idea about personal responsibility, liberty, or entrepreneurialism outside of running a little illegal taco stand or car chop shop off the back patio. We do not want the USA to import millions of illegals because wherever they go, they create the same cesspools they leave. And don’t listen to them when they tell you it’s poverty, or whatever. They never get out of poverty because they don’t want to. Nearly 120 years of American help and control in Puerto Rico, for example, has done exactly jack squat to change the situation. Watch the Philippines roll over soon and invite China to scratch their belly. Japan is building a military to face in inevitable, and they’re not.

Thankfully I have the requisite brown face and accent in English to say what needs to be said without people calling me racist. It’s time for Latin America to step up and take care of their own issues and stop fleeing to other countries whenever the next strong man decides to crap all over his country.

JoseQuinones on June 9, 2014 at 10:48 AM