Mexico could emerge as a key energy supplier to the US after a raft of energy reforms take effect later this year. In December, Mexico passed legislation aimed at revitalising the energy sector and ending state owned oil company Pemex’s monopoly, according to Reuters.
Mexico’s oil production has fallen by 25% since 2004 despite significant investment. Mexico has the 6th largest reserves of shale gas in the world but has so far neglected to capitalise on these reserves.
Earlier this year, Pemex announced that there are currently only 175 test wells for shale gas in Mexico, compared with a staggering 13,000 across the border in southern Texas.
Pemex stated that it will only be drilling 10 shale wells in 2014. The passing of Mexico’s energy sector reform legislation now leaves the door open for International Oil Companies (IOCs) to come in and exploit Mexico’s enormous resources.
In an interview with news agency Reuters, Canada’s minister of natural resources, Joe Oliver said that he expected Mexico to emerge as a serious competitor in the international energy market.
“There’s no question that Mexico has embarked on a bold move. They will emerge as another player. We’re focusing on diversifying our market, so that’s perhaps yet another reason to do that,” he said.
The concern for Canada is that Mexico’s progressive legislation will increase the amount of saleable oil and gas which can be sold to the US, thereby reducing the amount that Canada can export to its southerly neighbour.
Currently the US is Canada’s only customer for oil and gas, and Mexico’s emergence as a key player could have a significant effect on the Canadian economy. Canada are currently looking to diversify their oil & gas portfolio to counter this new threat.
Canada has a number of ongoing pipeline projects which are aimed at exporting its oil & gas to a wider audience. Chief among these is the Keystone pipeline project which is currently awaiting approval from the US state department.
