Mexico recently had national elections. The elections are critical to the oil and gas sectors. Several years ago, Mexico had gone from being nationalized to entertaining more privatization of its energy sector. The election was not only looking at the 500 seats of the lower house, but also local elections and governors in fifteen states.
Several years ago, I had the opportunity of serving on an advisory committee appointed by the Mexico Trade Commissioner, who was based in the Dallas regional office. Comprised of U.S. and Mexico business representatives, the advisory committee focused on trade and tourism between Mexico and the U.S. One issue addressed by the committee was U.S. and Mexico energy relations.
Since 1938, Mexico had been under strict governmental guidelines with no privatization in place. As I stated in my book, The Braking Point, “the first sign of changing of the guard came in 1938 when Mexico President Lazaro Cardenas nationalized the nation’s oil.” In August of 2013, President Enrique Pena Nieto proposed a plan to open Mexico’s oil and gas sector to foreign investments through private-public partnerships.
Since that time, I was interviewed for an article in the Wall Street Journal’s (WSJ) MarketWatch regarding the issue of why foreign oil forms should look to Mexico.
The following are some of the questions and answers discussed in that interview.
1) From an energy commodity standpoint, what does an open Mexico energy market mean – would opening that market up be substantial for oil or natural gas? How so?
At that time, there had been an oil production decline in Mexico. The country had strong potential to enhance oil and gas production by the support of U.S. technology alone. With U.S. technology and expertise, Mexico and North America could have potentially benefitted in a very positive way. With that said, there were a lot of details to work out.
2) How long, realistically, might it have taken to get the proposal approved? What was involved?
Since the WSJ interview, Mexico’s Congress passed constitutional amendments overturning the nationalization of the oil industry. Introducing a private-public partnership was new to a country that had not allowed the needed expertise to advance the economic benefits. Therefore, many U.S. companies were interested in the potential opportunities but with caution especially in what were the early stages.
3) How long was it before foreign companies jumped in and how willing were they to participate in Mexico? It appeared that many U.S. companies were interested in the potential, but there had to be certainty of stability before they spent the billions of dollars necessary for oil and gas development.
4) Which nations or companies would this have benefited the most and why?
Service and supply companies in the early stages likely would have benefited the most. There was a question to be addressed about whether only majors would be involved or if there would be opportunities for others to enter the market.
During the week of August 2nd, 2014, legislation was passed in Mexico’s Congress which finalized the opening up of Mexico’s energy sector for privatization. This legislation was welcomed by U.S. energy companies wanting opportunities in Mexico. Though the regulations surrounding Mexico’s energy development continued to be worked out, there was definitely cautious optimism.
Infrastructure was very important to the success of Mexico’s energy development. No doubt, it would take U.S. technology and expertise to move Mexico’s energy development efforts forward.
I continue with the message that America Needs America’s Energy. I have also advocated that the U.S. needs secure neighbors in Mexico and Canada. Together, we can create the People’s Energy Plan!
Future generations are depending on us to keep the American dream alive, America needs America’s Energy!
