Thu | Dec 14, 2017

Pemex still to dominate Mexican oil industry

Published:Friday | August 15, 2014 | 12:00 AM
Members of the government, including Pemex chief Emilio Lozoya (far left), attend a ceremony for the signing of a historic energy reform bill, at the National Palace in Mexico City, on Monday, August 11. The law will open the state-run oil, gas and electricity industries to foreign and private companies. Mexico is hoping for tens of billions of dollars in outside investment in deep-water oil drilling and shale gas production. - AP

Mexico's state-owned oil company will retain rights to exploit 83 per cent of the country's proven and probable reserves under the newly enacted opening of the energy business, although the company will form alliances with private firms in some of those fields, the government announced on Wednesday.

The allocation given to Petroleos Mexicanos, or Pemex, will equal about 2.5 million barrels of oil a day for 20.5 years, Energy Secretary Pedro Joaquín Coldwell said.

"This guarantees that Pemex will have its development secured in the immediate future," Coldwell said.

Pemex will get rights to only 21 per cent of the country's possible reserves. The company had asked for 31 per cent.

The allocations given to Pemex are part of the so-called 'Round Zero', the first areas on land and offshore to be assigned under an energy overhaul signed into law by President Enrique Peña Nieto on Monday. The new law allows private and foreign firms to sign production and profit-sharing deals in the oil, gas and electricity industries.

Private exploitation of Mexico's oil and gas drilling is being allowed for the first time since the industry was nationalised 76 years ago.

Pemex Chief Executive Emilio Lozoya said that beginning in November the company will start trying to form strategic partnerships with private companies on 10 different projects, which Pemex hopes to consolidate in 13 months.

"These first selected projects will allow us to leverage the possibility of establishing strategic partnerships to which Pemex had no chance, and will involve 1.5 billion barrels of (proven and probable) reserves," Lozoya said.

Round One will include bidding scheduled to start in February and will let private firms vie for rights to explore the 79 per cent of remaining fields where reserves are suspected.

Deputy Energy Secretary Lourdes Melgar said the bidding will be for the allocation of blocks in an area of about 28,500 square kilometres (11,000 square miles), with 91 per cent of that in exploration areas and the rest in blocks ready for extraction. The blocks include mature fields, offshore areas and shale gas fields.

The government expects opening those areas to private and foreign firms will bring in US$12.6 billion in investment annually over the next three years, Melgar said.

"Defining what blocks will be up for bidding is the easy part. What's difficult is putting those areas up for bidding," said Mexico City oil analyst David Shields. "The 'Round One' will be the biggest exercise in public bidding in Mexico's history and that will be very difficult."

- AP