Mexico - N. Oil and GasMexico - Oil and Gas
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.
OverviewMexico is one of the largest oil producers in the world (1.8 million barrels per day in 2018), and the fourth-largest in the Americas after the United States, Canada, and Brazil. In 2018, the United States imported over 210 million barrels of Mexico’s heavy crude and exported over 1.2 million barrels of refined petroleum products (more than 70 percent of Mexico’s domestic gasoline, diesel and jet fuel consumption) to Mexico. 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 2018.
Mexico boasts significant oil reserves, which will continue to drive investment from the private sector and offer opportunities for U.S. companies as contractors, sub-contractors or suppliers of equipment and/or technology.
Mexico Upstream Oil and Gas Equipment and Services Market Overview
(Figures in USD billions)
|Total Local Production||2.14||2.33||2.10||2.14|
|Imports from the U.S.||4.95||4.94||4.92||5.16|
|Total Market Size*||7.14||7.34||7.08||7.20|
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.
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. The reforms 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.
Mexican Energy Reform and the New Administration in 2019
The López Obrador Administration has indicated that it will respect the current legal framework of the energy reform, which provides greater certainty to oil and gas contractors already in Mexico. The Secretariat of Energy (Secertaría de Energía or SENER) completed the review of the 107 contracts awarded between 2015-2018 as well as the environmental permits and land rights required by the Agency for Security, Energy and Environment (Agencia de Seguridad, Energía y Ambiente or ASEA). However, as of the writing of this report, the Government has not announced any new bid rounds.
As a result of the energy reform, the National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos or CNH) is responsible for regulating, overseeing, and evaluating all hydrocarbons exploration and production activities in the country. The reorganization of national petroleum company Pemex means new responsibilities for CNH and the Energy Regulatory Commission (Comisión Reguladora de Energía or CRE), as well as the creation of ASEA. This reorganization helps 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.
A “Round Zero” hydrocarbon resource asset allocation process was completed in March 2014 when Pemex presented to SENER the areas in which they intended to retain exclusive rights to production or to develop production at a future date. 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 energy reforms, Pemex can partner with other private companies in developing these resources.
Production Sharing Contracts: Pemex and Round Zero Farmouts
Round Zero included the migration of contracts that Pemex formalized in 2013 with private companies for crude oil and gas mature fields exploration and production. In December of 2016 and in 2017, SENER awarded deep water exploration blocks to Statoil, PC Carigali, Murphy Energy, China National Offshore Oil, Chevron, and ExxonMobil. Under the first Farm Out project, CNH-A1-TRION/2016, the award was granted to Pemex in an alliance with BHP Billiton.
CNH, aided by SENER and the Secretariat of Finance and Public Credit (Secretaría de Hacienda y Crédito Público or SHCP), completed four phases of the “Round One” and “Round Two” tendering process, as well as one phase of “Round Three.” The Rounds involved tendering of selected sub-sectors of available and potential hydrocarbon resources that include shallow water, onshore mature fields, and deep water. There are 183 blocks, made up of exploration (109 blocks), extraction (60 blocks), and Pemex farmouts (14 blocks), with total estimated prospective resources of 19,945 million barrels of oil equivalent (MMBOE).
Market Competition: Rounds One, Two, and Three
In July 2018, CNH postponed until February 2019 two bid rounds for oil and gas blocks. The López Obrador Administration announced the cancelation of these two bid rounds in December 2018. The timing of any future bid rounds is uncertain.
Status of PEMEX-Farm Outs:
- CNH-A1-TRION: Deep water, awarded in March 2017
- CNH-A4-OGARIO: Land areas, awarded in October 2017
- CNH-02-AYIN-BATSIL: Deep water, will be awarded in March 2020
- CNH-A3-CARDENAS MORA; Land areas, will be awarded in March 2020
- CNH-A5-NOBILIS-MAXIMINI-CHACHIQUIN: Deep water, will be awarded in July 2020
- CNH-R01-L01/2014: 14 shallow water areas, awarded in July 2015
- CNH-R01-L02/2014: Nine land areas, awarded in September 2015
- CNH-R01-L03/2015: 25 land areas, awarded in December 2015
- CNH-R01-L04: 10 deep water areas, eight awarded in December 2016
- CNH-R02-L01/2016: 15 shallow water areas, 10 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
- 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
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.
Gas Market Overview
The Lopez Obrador Administration announced a ban on using hydraulic fracturing technologies to develop Mexico’s abundant shale natural gas resources. Furthermore, the true potential of accessing and developing shale gas in Mexico is hindered by low availability of the required technology, infrastructure, and water resources, and an abundant supply of low-cost natural gas from the United States. Please contact CS Mexico for a map of Mexico’s natural gas infrastructure.
The demand for imported upstream oil and gas equipment and services is expected to increase by two percent in 2019, and U.S. exports are expected to grow by five percent. The energy reform is driving market growth in that large investments will be required in order to comply with the award schedules for shallow water, onshore, deep water, and heavy oil and gas projects. In the upstream oil and gas sub-sector, Pemex is no longer the only player. Large and midsized private sector companies require suppliers to register with them to sell their equipment and services.
There are opportunities in the upstream sub-sector 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 have bid 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” (Autorizaciones de Reconocimiento y Exploración Superficial or ARES).
Pemex’s investment plan for 2019 in shallow waters includes the development of 16 new oil and gas fields; construction of 13 platforms; installing 14 pipelines (175 kilometers); and eight interconnections to the existing shallow water platforms in the Gulf of Mexico.
Onshore projects include constructing three new platforms and drilling in existing fields; installing 13 new pipelines (88 kilometers long). The Lopez Obrador Administration has identified increasing Mexico’s refinery capacity as a top priority for his term. The government increased Pemex’s budget in an effort to modernize the country’s six refineries and build a new, multi–billion-dollar refinery at the Port of Dos Bocas in the State of Tabasco. These significant projects will create new opportunities for U.S. suppliers of relevant equipment, technologies, and services.
The opening of the upstream oil and gas market will provide opportunities to sell technology and services to private companies or for joint ventures and partnerships between U.S. companies and Pemex. In the event upstream auctions are reinitiated, companies may bid individually on CNH tenders. Current tenders require a Mexican local content of 25 percent when there is local production, increasing to 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.
|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 International||www.pemexprocurement.com|
|Mexican Association of Hydrocarbon Companies (AMEXHI)||http://www.amexhi.org|
|Agency for Security, Energy and Environment (ASEA)||http://www.asea.gob.mx|
- LAGCOE 2019 October 9–11, 2019, New Orleans, Louisiana
- Energy Mexico 2019, January 28–30, 2020, Mexico City
- Offshore Technology Conference (OTC), May 4–7, 2020, Houston, Texas
For more information on the oil and gas sector in Mexico, please contact:
U.S. Commercial Service—Mexico City
Tel.: +52 (55) 5080-2000 ext. 5211
Mexico Energy Trade Development and Promotion