Mayer Brown: Mexico’s Congress trying to enact energy reform amid falling production rates

It easily could take longer than many might expect before state-run Petroleos Mexicanos (Pemex) and other companies are able to unlock Mexico’s vast oil and gas resources, said Jordy Herrera, the nation’s immediate past secretary of energy, told a Mayer Brown energy conference in Houston on May 15.

Calling pending energy reform the “last big chance for Mexico to become a stronger economy,” Herrera said Mexico’s Congress is working to enact secondary legislation that would outline the logistics of implementing a sweeping constitutional amendment passed in December 2013.

Mexico’s Congress received proposed secondary legislation on Apr. 30. Pending energy reforms would allow companies other than Pemex to explore, develop, and produce oil and gas in Mexico. The reforms also will change the way the energy sector works inside the country, Herrera said.

“It’s a huge transformation,” he said, adding that it will take time for Mexico’s lawmakers and regulators to debate and implement the anticipated overhaul. The country has to figure out what types of contracts will be allowed, and contracts are expected to vary by area and by geology.

“Congress does not work that fast,” Herrera said, adding that Mexico’s oil production has declined for about a decade. The declining production is attributed to declines from mature fields such as Cantarell.

Herrera said current oil production is about 2.5 million b/d compared with a 2004 peak of about 3.5 million b/d and gas production is about 5.6 bcfd compared with peak numbers of 8 bcfd.

Meanwhile, Mexico has been importing increasingly larger volumes of gas and gasoline. The reforms have been lauded as a way for Mexico to reverse that trend. Some Mexican officials have said they want oil production to reach 3 million b/d by 2018 (OGJ Online, Oct. 20, 2011).

Jose Valera, a Mayer Brown partner in the global energy group, said Mexico was losing money with its energy monopoly structure because oil and gas production and reserves were on the decline while imports were rising.

Mayer Brown publicizes legal updates and its analysis on Mexico’s reforms through the law firm’s Mexico energy web site.

Preliminary figures from Pemex showed crude oil production during January through April fell to 2.49 million b/d compared with about 2.54 million b/d for the same period last year, the Wall Street Journal reported May 12.

“I think it is going to take longer than people are expecting,” for Pemex and other companies to develop and produce significant additional oil and gas volumes, Herrera said.

Round Zero allocations pending

In an initial process called Round Zero, Pemex requested that it be allowed to retain 85% of Mexico’s known oil and gas resources, Herrera said. Mexico’s government is scheduled to decide by Sept. 17 regarding what Pemex will be allowed to keep under Round Zero.

“My opinion is it is going to change a little,” Herrera said. “We think the final number should be around 75%.” That would open 25% of the nation’s known resources to competitive bidding by other companies outside Pemex.

Herrera said he also expects “a huge discussion” on whether Pemex will be allowed to farm out areas that it is authorized to keep under Round Zero.

“Pemex has never been in deep water and Pemex has never been in unconventionals,” Herrera said, adding that Pemex needs help with both finances and technology in these areas.

Contact Paula Dittrick at paulad@ogjonline.com.

Related Articles

US Forest Service withdraws proposed groundwater directive

06/22/2015 The US Forest Service withdrew a proposed directive on groundwater resource management on June 19, and announced it would hold public discussions o...

Salerno considers same-season relief wells basic Arctic offshore tool

06/22/2015 US Bureau of Safety and Environmental Enforcement Director Brian Salerno disagreed with oil and gas industry comments that a requirement in propose...

Williams rejects unsolicited bid from Energy Transfer Equity

06/22/2015 Williams Cos. Inc., Tulsa, has rejected an unsolicited all-equity acquisition proposal valued at $53.1 billion from Dallas-based Energy Transfer Eq...

WPX Energy adds to acreage in Gallup oil play

06/22/2015 WPX Energy Inc., Tulsa, has added to its San Juan Gallup acreage in New Mexico with the purchase of another 14,300 net acres from an undisclosed se...

Lundin appoints president, chief executive officer

06/22/2015 Lundin Petroleum AB reported that its board has appointed Alex Schneiter as president and chief executive officer following Ashley Heppenstall’s de...

MARKET WATCH: NYMEX, Brent crude oil price fall on Greece’s debt concerns

06/22/2015 US crude oil futures for July delivery dropped back below $60/bbl on the New York market in June 19 trading, and analysts said concerns over Greece...

A strategy shift-1

06/22/2015

Energy strategy, as opposed to energy policy, is being transformed in the US by stealth. Policy changes are visible.

Nationalism may restrict climate efforts, Statoil economist warns

06/22/2015 Growing national confrontations could undermine efforts to meet goals to reduce global climate change impacts, Statoil’s chief economist warned.

Watching Government: Considering energy R&D

06/22/2015 Moving from research to development (R&D) became a recurring question as the US Senate Energy and Natural Resources Committee considered 43 sep...
White Papers

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST


Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

When Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST



On Demand

Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected