While the rest of the U.S. is caught up worrying about illegal aliens flooding across our southern border, the opportunistic Mexicans flowing north may be soon met by a wave of American E&P execs running the other direction. Will Mexico in fact open its oil and gas reserves to foreign and private companies? The battle rages in the Mexican government. President Felipe Calderon who, like his predecessor Vicente Fox, believes the only way to save the state oil company Pemex from a not-so-slow death is privatization. Opposed is nemesis Andres Manuel Lopez Obrador, a leftist who barely lost a presidential run against Calderon and who believes that state oil revenues should fund Mexican social programs. Meanwhile, the nation's existing reserves decline and production falters. With some 12 billion barrels proved and production of 3.7 million barrels per day, Mexico has nigh nine years left of beautiful crude. Most notably the 30-year-old supergiant shallow-water GOM Cantarell Field, which supplies two-thirds of Mexico's overall production and is the world's second largest producer, is playing out. In 2006 production declined from 2 MMBO/d to 1.4 MM, and is expected to fall dramatically further. As Pemex revenues account for 40% of the Mexican budget and without the capex to fund exploration nor technology, a national crisis awaits the neighbors to the south. The true prize lies in the Mexican GOM deepwater, near the U.S. territory at depths of 9,000 feet, but Pemex is without the expertise or cash to get to it. While foreign companies are currently allowed in as contractors, they are not permitted to share in the bounty of discoveries. Calderon wants to change that, giving Pemex the right to enter into joint-production agreements as it sees fit. He has a mountain of opposition, but real and ominous revenue declines could soon erode opposition. What if Calderon succeeds? Imagine a Mexico open for exploration. Onshore and offshore, the government would reap a bonanza as E&Ps explored the vast landscape and oceans. How much, for instance, lies underground just across the Rio Grande? Private Mexican companies would thrive. Mexicans workers would find significant employment in the oilpatch and the Mexican middle class would rise. And we just might not need that border fence after all. Steve Toon, Editor, A&D Watch, Contributing Editor, Oil and Gas Investor, firstname.lastname@example.org
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