HOUSTON — The U.S. Energy Information Administration has raised its estimate for Mexican oil production by 75 percent on the strength of industry overhaul signed into law this August.
The reform, which was the centerpiece of a wider economic liberalization spearheaded by President Enrique Peña Nieto, ends a state monopoly on the energy industry that stretches back to 1938. Already, Mexico’s Petróleos Mexicanos, or Pemex, is gearing up to compete and partner with private companies. The reforms are expected to reverse Mexico’s declining oil production.
Before the measures took effect, the Energy Information Administration had projected Mexico’s oil production would decline from 3 million barrels per day in 2010 to 1.8 million barrels in 2025, then level off at about 2 million barrels a day through 2040.
In late July, Pemex posted its seventh consecutive quarterly loss and lowered its oil production forecast to 2.4 million barrels a day from 2.5 million — the lowest annual output since at least 1990.
The company is counting on partnerships with other private companies and new investment to reverse its fortunes. Pemex is also undergoing a restructuring that it hopes will make the company more competitive.
Falling Production: Pemex predicts lowest production in more than two decades
The Energy Information Administration estimates that under the new structure, Mexico’s countrywide production will stabilize at 2.9 million barrels per day through 2020 and then increase to 3.7 million barrels a day by 2040.
The report noted it is assuming the energy overhaul will succeed — a view consistent with the cautious optimism of many industry players.
Mexican government officials have said they expect to see $50 billion in energy investment over the next three years due to the reform. Another report by Birmingham, Ala.-based financial company BBVA Compass estimated that both sides of the Mexican-U.S. border region could be among the biggest beneficiaries, with $1.2 trillion in new, wider economic activity there.
In early August, Mexican regulators took the first steps toward allocating the production rights of the country’s resources. Pemex retained the rights to exploit 83 percent of the country’s proven and probable reserves and laid claim to only 21 percent of the country’s possible reserves — less than it sought.
The state-owned company is expected to form partnerships to exploit at least some of those oil resources.