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

Congressional Republicans see undue restrictions in 2017-22 OCS draft

04/23/2015 Congressional Republicans—led by Senate Energy and Natural Resources Committee Chair Lisa Murkowski (Alas.) and House Natural Resources Committee C...

CERAWeek: Evolutions of Pemex, YPF running parallel

04/23/2015 Chief executives of Mexico’s Petroleos Mexicanos (Pemex) and Argentina’s YPF SA are both seeing energy reforms within their respective countries, a...

Diligence essential to avoid future offshore mistakes, panel told

04/23/2015 The offshore oil and gas industry—as well as the federal agencies that regulate it—must remain diligent to avoid the mistakes that led up to the Ma...

CNOOC starts oil production at Kenli 10-1 field

04/23/2015

China National Offshore Oil Corp. Ltd. reported the start up of oil production from Kenli 10-1 field with 12 wells producing 10,750 b/d.

Gazprom: EC’s antitrust allegations ‘unsubstantiated’

04/23/2015 OAO Gazprom says antitrust allegations by the European Commission regarding territorial restrictions and an unfair pricing policy are “unsubstantia...

Upper East Coast US Senate, House members oppose Atlantic leasing

04/23/2015 Observing both Earth Day and the fifth anniversary of the Macondo deepwater well accident and crude oil spill, US Senate and House members—largely ...

Petrobras reports $2.1 billion write-down after anticorruption probe

04/23/2015 Petroleo Brasileiro SA (Petrobras) reported a $2.1-billion write-down from improper payments identified in the Brazilian Federal Police’s “Operatio...

MARKET WATCH: NYMEX crude oil price drops on inventory build

04/23/2015 Crude oil prices for June delivery dropped modestly on the New York market on Apr. 22 to remain above $56/bbl for June delivery following another r...

CERAWeek: Company, industry have transformed since Macondo, BP CEO says

04/22/2015 This week marked the 5-year anniversary of the Deepwater Horizon explosion in the deepwater Gulf of Mexico that took 11 lives and resulted in the c...
White Papers

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

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts


Prevention, Detection and Mitigation of pipeline leaks in the modern world

When Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 

register:WEBCAST



On Demand

Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?

register:WEBCAST


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.

register:WEBCAST


The Future of US Refining

Fri, Feb 6, 2015

Oil & Gas Journal’s Feb. 6, 2015, webcast will focus on the future of US refining as various forces this year conspire to pull the industry in different directions. Lower oil prices generally reduce feedstock costs, but they have also lowered refiners’ returns, as 2015 begins with refined products priced at lows not seen in years. If lower per-barrel crude prices dampen production of lighter crudes among shale plays, what will happen to refiners’ plans to export more barrels of lighter crudes? And as always, refiners will be affected by government regulations, particularly those that suppress demand, increase costs, or limit access to markets or supply.

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