This is a best prospect industry sector for this country.  Includes a market overview and trade data.
Last Published: 10/12/2018

The oil and gas sector is a best prospect industry sector for Mexico. This section includes a market overview and trade data on the sector.

Overview

Mexico is one of the largest oil producers in the world (2.1 million barrels per day in 2017) and the third-largest in the Americas after the United States and Canada. In 2017, the United States imported over 212 million barrels of Mexico’s heavy crude and exported over 194 million barrels of refined petroleum products to Mexico (more than 50 percent of Mexico’s domestic gasoline consumption). Oil is a crucial component of Mexico's economy and earnings from the oil industry accounted for about 32 percent of total government revenues in 2017.

Significant oil reserves have been documented in Mexico, which will drive investments from the private sector and offer U.S. companies opportunities, either as project developers, operators, contractors, sub-contractors, or suppliers of equipment and/or technology.

 

This level of production and expanded exploration and drilling plans drive new opportunities for U.S. exporters of oil and gas equipment and service companies in the upstream segment of the sector. The following table provides market size estimates for oil and gas equipment and services.

Mexico Upstream Oil and Gas Equipment and Services Market Overview
(Figures in USD billions)

 2015201620172018 (Estimated)
Total Local Production2.162.142.332.38
Total Exports1.881.892.002.03
Total Imports6.836.897.017.14
Imports from the U.S.
 
4.924.954.945.26
Total Market Size*7.117.147.347.49
Exchange Rates15.8218.6818.9119.09

*Total market size = (total local production + imports) - exports
Source: (Mexican) National Bank for International Trade (BANCOMEXT), Secretariat of Economy, Global Trade Atlas, interviews and information from officials from Petróleos Mexicanos (Pemex), the Secretariat of Energy (SENER), and National Hydrocarbons Commission (CNH) Contractors. *Estimated

Mexican Energy Reform

In December 2013, Mexico amended its constitution to allow both local and foreign private investment into the energy sector for the first time since its nationalization in 1938. Mexico is among the most important non-OPEC producers in the world. The reforms now permit international energy companies to operate in Mexico and include provisions for competitive production sharing contracts and licenses. In addition to increasing the demand for technology and technical expertise for the development of upstream deep water and shale oil and gas fields, the energy reform also allows for greater private investment in retail fuel distribution.

Mexico had historic elections on July 1, 2018. Andrés Manuel López Obrador won the Presidency, and his National Regeneration Movement (MORENA) party and coalition partners won both chambers of Congress. President-elect López Obrador has identified four energy policy priorities: 1) increase domestic oil and gas production; 2) refurbish Pemex’s six existing refineries; 3) construct a new refinery in the State of Tabasco; and 4) increase electricity generation, mainly by updating existing hydroelectric plants. CS Mexico will track and report on the new Administration’s energy policy. 

 

Pemex Transformation into a Productive State Enterprise

Pemex, because of the 2013/2014 energy reform, now has two business divisions: Pemex Exploration and Production, and Pemex Industrial Transformation. Pemex Industrial Transformation controls the national gas, refining, and petrochemical businesses and affiliated companies (Drilling, Logistics, Fertilizers, Ethylene, and Cogeneration and Services). Pemex International (PMI), Pemex’s international business development subsidiary, will continue to exist, as it buys and sells fuel and basic petrochemicals, but not equipment. 

To participate as a supplier to Pemex, companies must first complete the registration process at the Pemex Procurement International (PPI) website (www.pemexprocurement.com). Companies that wish to become registered suppliers must submit copies of their articles of incorporation, audited financial statements, and commercial and financial references. PPI states that they currently have more than 10,000 registered suppliers, and over 70 percent of these are U.S. firms. Beginning in January 2016, PPI has migrated all registered supplier information into a proprietary procurement system called Achilles.

Pemex’s authorized budget for 2018 is USD 11.0 billion. During 2017, 107 companies won bids on the National Hydrocarbons Commission (CNH) project blocks, explained below. The Pemex budget and significant investment from these bids make the upstream oil and gas sector attractive for growth over the next few years.

 

New Regulatory Agencies

The 2013/2014 energy reform made the CNH responsible for regulating, overseeing, and evaluating all hydrocarbons exploration and production activities in the country. The reorganization of Pemex means new responsibilities for CNH and the Energy Regulatory Commission (CRE), as well as the creation of a new regulator, the Agency for Safety, Energy and the Environment (ASEA). This regulatory oversight is meant to ensure that Pemex, its contractors, and companies bidding and awarded projects by CNH obtain the proper environmental permits before exploration, drilling, and extraction activities can begin.

Government Offers Production Sharing Contracts: Pemex and Round Zero “Farmouts”

A hydrocarbon resource asset allocation, or farmout process, was a key part of Pemex planning following the enactment of the energy reform. “Round Zero” farmouts were completed in March 2014 when Pemex presented to the Secretariat of Energy (SENER) the areas where Pemex intends to retain exclusive rights to production or to develop production at a future date. These Round Zero farmouts allowed Pemex to maintain control of 83 percent of reserves (1P, 2P, 3P) for current and future investment and development. Under the reforms, Pemex can partner with other private companies in developing these resources.

Round Zero included the migration of contracts that Pemex previously formalized with private companies for exploration and production of crude oil and gas mature fields. The award process has continued across multiple rounds. Below we provide a breakdown through Round Three.

 

Rounds One, Two, and Three: Market Competition

In December 2016, CNH, aided by SENER and the Secretariat of Finance (SCHP), completed four phases of Round One. In January 2018, they completed the Round Two tendering process. Round One and Round Two involved tendering of selected sub-sectors of available and potential hydrocarbon resources that include shallow water, onshore mature fields, deep water, and unconventional. SENER completed Round 3.1 in March 2018, however in July 2018 CNH announced postponement of Rounds 3.2 and 3.3 until at least February 2019. Please contact CS Mexico for further details on the rounds outlined below.

Status of Pemex Farmouts:

  • CNH-A1-TRION/2016: Deep water, awarded in December 2016
  • CNH-A4-OGARIO/2017: Land areas, awarded in October 2017
  • CNH-02-AYIN-BATSIL/2017: Deep water, bidding TBD
  • CNH-A3-CARDENAS MORA/2018; Land areas, bidding TBD
  • CNH-A5-NOBILIS-MAXIMINO/2017: Deep water, bidding TBD

Status of Round One:
  • CNH-R01-L01/2014: 14 shallow water areas, two awarded in July 2015
  • CNH-R01-L02/2014: Five shallow water areas, three awarded in September 2015
  • CNH-R01-L03/2015: 25 land areas, awarded in December 2015
  • CNH-R01-L04/2015: 10 deep water areas, eight awarded in December 2016
Status of Round Two:
  • CNH-R02-L01/2016: 15 shallow water areas, ten awarded in June 2017
  • CNH-R02-L02/2016: 10 land areas, awarded in July 2017
  • CNH-R02-L03/2016: 14 land areas, awarded in July 2017
  • Round CNH-R02-L04: 29 deep water areas, 19 awarded in January 2018
Status of Round Three:
  • CNH-R03-L01/2017: 35 shallow water areas, 16 awarded in March 2018
  • CNH-R03-L02/2018: 37 land areas, postponed until at least February 2019
  • CNH-R03-L03/2018: Nine land areas, postponed until at least February 2019

Gas Market Overview

Mexico has an estimated 17 trillion cubic feet (Tcf) of proven natural gas reserves. Natural gas is increasingly replacing oil as a feedstock in power generation. However, higher levels of natural gas consumption will likely depend on more pipeline imports from the United States or liquefied natural gas (LNG) imports from other countries. Mexico has an estimated 545 Tcf of technically recoverable shale gas resources—the sixth largest in the world. The true potential of accessing and developing shale gas in Mexico is hindered by the low availability of required technology and water resources, as well as government policies currently devoted to increasing the supply of low-cost natural gas from the United States. However, Mexico encouraged increasing domestic natural gas production by including unconventional sources in their Round Three auctions which were delayed for lack of bidding interest.

Leading Sub-Sectors

There are various sub-sectors representing potential for U.S. exporters:
  • Upstream oil and gas equipment and services
  • Geological services
  • Equipment and services for downstream refining, distribution, and storage
We explore these opportunities below.
 

Opportunities

The U.S. Commercial Service Mexico is happy to assist you in exploring market opportunities in oil and gas. The opening of the upstream oil and gas market will provide opportunities to sell technology and services to private contractors and Pemex or for joint ventures and partnerships between U.S. companies and Pemex. In addition, companies may bid individually on CNH tenders. Current tenders require a Mexican local content of 25 percent starting in 2015 when there is local production, and this requirement will reach 35 percent by the end of 2025. When there is no local production, the local content requirement may be waived. U.S. suppliers and investors are encouraged to monitor progress and seek out opportunities that may include joint ventures, production sharing contracts, and/or concessions.

Per the table above, the demand for imported upstream oil and gas equipment and services is expected to increase by 2.0 percent in 2018 and U.S. exports are expected to grow by 6.0 percent. The energy reform is driving market growth—meaning that large investments will be needed to comply with the award schedules for shallow water, onshore, deep water, heavy oil, and unconventional oil and gas projects. In the upstream oil and gas subsector, Pemex is no longer the only player. The large and midsized private sector companies are invited to bid and will be requiring suppliers to register with them to sell their equipment and services.

There are opportunities in the upstream subsector for U.S. companies to sell technology and services to private companies such as Chevron, ExxonMobil, Marathon Oil, Murphy, Premier Oil, and third country companies such as BHP Billiton, BP Exploration, Ecopetrol, Eni International, Japan Oil, Japan Petroleum, and Pacific Rubiales, which are bidding on the shallow water tenders. Equipment needed includes derricks for oil and gas fields, drilling equipment for oil and gas fields, Christmas tree assemblies, drilling rigs, oil and gas field drilling machinery, and equipment, and geological services companies.

Regarding selling geological services, CNH requires companies to register on its website so that bidding companies can submit a bid with CNH pre-authorization. CNH has created a program called “Authorizations for Recognition and Exploration of Upstream Oil and Gas (ARES).”

The Government of Mexico is poised to expand investments to downstream refining, storage, and distribution, creating opportunities for a range of U.S. suppliers with expertise and solutions in these areas. Among various projects, for instance, the outgoing and incoming presidential administrations are evaluating or actively pursuing development of refining and storage in several ports. Energy reform has also triggered plans for distribution opportunities, from expansion of gasoline filling stations to discussed private contracts to supply aircraft fuels and lubricants to Mexican airports.
 

Web Resources
 

Secretariat of Energy (SENER)www.energia.gob.mx
Energy Regulatory Commission (CRE)www.cre.gob.mx
Petroleras Mexicanas (Pemex)www.pemex.com
College of Petroleum Engineers of Mexico (CIPM)www.cipm.org.mx
Pemex Procurement Internationalwww.pemexprocurement.com
Mexican Association of Petroleum Service Companieswww.amespac.org.mx
Agency for Security, Energy and Environment (ASEA)www.asea.gob.mx

Events

Contacts
 

For more information on the oil and gas sector in Mexico, please contact:

Mr. Francisco Ceron

Commercial Specialist

U.S. Commercial Service - Mexico City

Tel.: +52 55 5080 2000 ext. 5211

Francisco.Ceron@trade.gov



 

 

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Mexico Energy Trade Development and Promotion