woody with a view
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Mexico Is Near Easing Oil Laws in Bid to Attract Foreign Firms
http://online.wsj.com/article/SB122462063288755531.html?mod=...
MEXICO CITY -- With oil prices falling and its own output fading, Mexico appears close to overhauling its nationalistic oil laws, allowing private oil
companies to help find and produce more oil.
While the changes would be historic given Mexico's longstanding antagonism to foreign participation in its oil sector, the new laws may not go far
enough to attract interest from big oil companies or help the country pump more oil anytime soon.
Mexico's Senate on Tuesday began discussions of the reform bill, which allows state oil monopoly Petróleos Mexicanos to work more closely with private
companies and gives the state company more managerial autonomy. The bill has been passed by all three major political parties at the committee level,
signaling broad support.
Mexico's oil output for September was 2.72 million barrels a day, the lowest monthly level since 1995, Pemex said this week. For the year's first nine
months, Mexico's output fell 10% from the year-earlier period and exports plunged 18%.
Mexico's ability to stem the slide in oil production carries important consequences for its financial stability, the U.S. and the global oil market.
Mexico has been one of the world's top 10 producers since the late 1970s, and has long been one of the top three sources of foreign oil for the U.S.
Its decline will aggravate the U.S.'s reliance on the Middle East for oil. Mexico also relies on oil export money for nearly 40% of government
spending.
Like many world oil producers, Mexico has aging oil fields. The country is believed to hold vast untapped fields in the deep waters of the Gulf of
Mexico, but Pemex lacks the technology to access them. At current rates of decline, Mexico could become a net oil importer within four or five years.
International oil firms normally lease acreage in oil-rich areas, explore, and pay local taxes and royalties on production. Since that isn't allowed
under Mexico's Constitution, the idea is to pay oil companies a fee in cash rather than allowing them to take a percentage of the oil itself. The
contracts could allow for some upside to companies, such as bonuses when they complete a project under budget or find more oil than initially
expected.
President Felipe Calderón openly describes the reform as what is politically possible, but falling short of what the industry really needs.
So far, oil companies are lukewarm on the prospects. "We have to wait for Pemex to come out with contracts to see if they are globally competitive,"
said a Mexico City-based executive at an international oil firm. Some companies said Mexico might have a tough time competing with terms on offer in
places such as Angola, Nigeria and Colombia -- especially with oil prices low.
In 2004, Mexico launched service contracts in the well-explored Burgos natural-gas basin south of the Texas border. This attracted companies looking
for a foothold in Mexico such as Spanish-Argentine Repsol YPF, Brazil's Petroleo Brasileiro SA and smaller companies such as Houston-based Lewis
Energy.
But rising costs made the contracts a losing proposition for many who signed up. The new contracts for deep water would have to offer significantly
better conditions, analysts say.
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tjBill
Senior Nomad
Posts: 516
Registered: 10-6-2007
Location: Tijuana
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My uncle worked for Chevron, they did a lot of exploration for Petrovesa, the Venezuela national oil company. Its a very expensive process, that
requires sophicated technology. Mexico does not have the technology. As result, the only option is to allow foreign companies to do it.
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