Mexico has finally faced the reality that change is needed to overcome decades’ worth of declining oil production. And the recent passage of the energy reform bill, which opens the upstream, downstream, and midstream sectors among others to private investment, in Congress is a giant leap in the right direction. With the US and Canada as its neighbors, there is little reason for Mexico to be left behind, especially when it comes gaining valuable technical knowledge to unlocking shale plays and developing deepwater assets. The bill’s passage appears to be a win-win for not only Mexico and its struggling economy, but also those with the know-how and a willingness to form partnerships. Looking at bountiful hydrocarbon finds on the US side of the Gulf of Mexico (GoM) and the likelihood that the Eagle Ford shale basin extends beyond the US border into Mexico, it is evident that there is a great opportunity for Mexico. The US Energy Information Administration (EIA) believes Mexico has at least 10 Bbbl of proven oil reserves, mostly offshore, and about 481 Bcm (17 Tcf) of proven natural gas reserves. The country could also possess an estimated 16 Tcm (545 Tcf) of technically recoverable shale gas resources, ranked by the EIA as the sixth largest amount in the world. Citing JPMorgan Chase & Co., Bloomberg reported that the reform could increase foreign investment by as much as US $15 billion annually. And that is great news for the country, which desperately needs a boost to its economy. The government, private parties, and Pemex will be able to enter production-sharing contracts and profit-sharing contracts. Private companies also would be permitted to book reserves, but the hydrocarbons would remain property of Mexico. Passage of the bill is a huge milestone for Mexico, but it’s not a done deal yet. Mexican states still need to approve the changes, and then comes the enormous task of creating and approving the secondary legislation vital to enacting concepts in the bill. These, of course, could lead to more debate and protest by those who initially oppose and continue to oppose the reform effort. Hopefully, those who believe the change is not the best move for the country will see the benefits, change their tune, and work for the cause, or at least not fight as hard against it. Progress appears imminent, and more good news could be forthcoming if US legislators approve the budget. The budget would make way for the implementation of the US-Mexico transboundary deal, which allows both countries to jointly explore and produce hydrocarbons in the western part of the GoM. Government officials from both countries signed the agreement in 2012, and Mexico ratified the deal shortly afterward. But movement of the legislation has been slow in the US, mainly due to a provision that requires companies that commercially develop oil or gas to disclose payments made to foreign governments. If the budget is approved and the portion concerning the transboundary agreement remains in place, the move would open nearly 1.5 million acres that are currently under moratorium and remove legal uncertainty stemming from maritime border issues. The GoM acreage could hold up to an estimated 172 MMbbl of oil and 8.6 Bcm (304 Bcf) of natural gas, according to the Bureau of Ocean Energy Management. Contact the author, Velda Addison, at email@example.com.
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