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Mexico was one of the first countries in the world to exploit its reserves of oil and gas. The country exported oil for the first time in 1911, by the 1930's it was the second largest producer of oil in the world, after the US.
All of the companies working in Mexico's oil and gas sector at the time were foreign companies. Then in 1938, poor labour relations caused the then president Lázaro Cárdenas to seize their assets and nationalise the industry. He created Petróleos Mexicanos, known as Pemex, the company which has since then remained in monopoly control of oil and gas sector.
Almost eighty years later, oil majors such as BP and Shell are returning to the country as the current government follows through on promises to reform the energy market.
Looking for partners
Pemex remains very much the incumbent domestic giant in the Mexico's oil and gas sector. It has the rights to 83% of the proven and probable oil reserves in the country. But only 21% of the possible reserves, opening up possibilities in the private sector.
Pemex is looking to partner with foreign firms more after decades of what many analysts would call isolation from the international market. Speaking at the SPE Offshore Oil and Gas Show in Aberdeen this week, Manuel Mariscal, vice president of support services at Pemex, says: “We've made a lot of changes and we're seeing a lot of benefits coming from them. We've streamlined the process to work as a supplier and have a web portal for all those interested to register.”
Enrique Cornejo, head of energy and environment at UK Trade and Investment agrees that more Mexican companies are looking overseas for suppliers and partners than before. “A transformation has taken place since 2013,” he says. “The energy reform makes it possible for foreign companies to bid for oil and gas work.”
“Pemex has been investing a lot into the country, but the challenge is in the complex fields.”
Large firms lead
Unsurprisingly, the large firms have been the first to move in, expanding on existing footprints and relationships in Mexico. Earlier in the year, Pemex announced partnerships with both BP and Shell. Oil and gas supplier Schlumberger's second biggest market in terms of revenue is Mexico. Amec FosterWheeler is said to be making working in Mexico country a top priority.
Cornejo says that the larger companies trailblazing the way into Mexico will make it easier for smaller firms to work with Mexican companies in the supply chain.
There are also opportunities for operators and engineering firms in the upgrading of Mexico's infrastructure. “One of the main aims is to connect Mexico to the US and deliver gas. But there is also advances to be made in areas of Mexico that don't have good infrastructure yet,” says Cornejo.
Auction rounds
The first round of contracts to international companies were awarded in July, when just two of the 14 blocks in the Gulf of Mexico were awarded to a consortium that included UK company Premier Oil, Mexican company Sierra Oil and Gas and US firm Talon.
The response to the auction from industry was widely seen as lacklustre and disappointing, mainly because of the low oil price and what many perceived as onerous rules. The slow response is not symptomatic of a reluctance to do business in Mexico, insists its government because of historical issues of corruption, bureaucracy and security concerns.
Mario Gonzalez, from trade and industry organisation Promexico, says: “There are certain preconceived ideas about what it is like to do business in Mexico. But things are changing and now it is no different from what is like in a European country.”
The Mexican government has tweaked the bidding rules and believes the next phase, which takes place at the end of September for fields in the Gulf of Mexico, will attract more attention. Phase two consists of five contracts, estimated to contain 355 million barrels of oil equivalent (boe).
However the bidding goes, today, Mexico produces around 2.2 million boe per day and is the eighth largest producer of oil in the world. It has the fourth largest reserves of oil and gas in the Western Hemisphere, and for the first time in decades, a government and industry keen to work internationally.