The reform proposed by President Enrique Peña Nieto on Monday would partly reverse more than 50 years of state-owned oil production — Mexico was the first country to take over its oil industry — and allow foreign private oil companies to partner with the national oil company in sharing profits from exploration. American oil companies responded with enthusiasm, predicting that Mexico would open for exploration deep-water oil fields in the Gulf of Mexico and large onshore oil and gas shale deposits, with terms that would be attractive to companies that have deep pockets and experience with the newest drilling technologies. “This is a good start,” said Kurt Glaubitz, a Chevron spokesman. “We’re optimistic about the reforms that are taking place and the opportunities that Mexico is presenting to international oil companies.” Mexico ranks ninth among the world’s leading oil producers and the third among sources of foreign oil to the United States, but its production has plunged in recent years. Its exports to the United States have plummeted from 1.7 million barrels a day in 2006 to a little more than 900,000 barrels a day in recent months, while it has been forced to import increasing amounts of gasoline from the United States refineries. Mexico’s proven oil reserves have fallen since the 1980s from nearly 60 billion barrels of oil to a little more than 10 billion as shallow-water oil fields have been tapped out. The national oil company, Petróleos Mexicanos, does not have the capital or expertise to extensively explore deep-water prospects in the Gulf of Mexico or technically challenging shale fields requiring modern techniques like horizontal drilling and hydraulic fracturing, which have substantially increased production north of the border. In a report this week, Citi Research estimated that Mexico might have 29 billion barrels of oil and gas reserves in the Gulf of Mexico that could be recoverable with foreign capital and expertise. Mexico could also have an additional 13 billion barrels of recoverable oil shale reserves. All told, energy experts say the country could increase its production by as much as 25 percent by 2024, to nearly four million barrels a day — potentially vaulting Mexico to the fifth or sixth position among the most prolific oil producing countries. An additional million barrels of oil a day on world markets would represent less than 2 percent of current global demand, but that could still provide an additional cushion — along with booming production in the United States and Canada — to ease oil price spikes during periods of instability in the Middle East and North Africa. Currently, world oil markets are well supplied and several OPEC nations have expressed concerns that they are losing the North American market because of the expansion in American oil shale drilling in recent years. Increased production from Mexico, which is not a member of OPEC, would further decrease the cartel’s leverage. The United States would be the most likely beneficiary of a new Mexican oil boom since its fields are close to Gulf of Mexico refineries, which are already designed to process various grades of Mexican crude. “The impact on the global market could be very significant,” said David L. Goldwyn, a State Department coordinator for international energy affairs in the first Obama administration. “You could have increased production of light sweet crudes from the deep water Gulf, which would provide significant pressure on OPEC production. It means pressure on the Saudis, Kuwaitis, the Venezuelans and Russia.” Mr. Goldwyn said an increase in Mexican oil production could drain foreign oil company investment from countries like Angola, Venezuela and Nigeria as well as the new Arctic oil and gas regions, where costs for exploration and development are high. The Mexican president’s proposal is expected to be enacted by the Mexican Congress next year. But oil experts caution that it could take as long as 10 years — for Mexico to conduct seismic testing and an auction for deep-water prospects, and for the foreign companies to do their own appraisal drilling — for production to begin in earnest. Experts say, however, that shale drilling and enhanced oil recovery from older wells could begin sooner. Jorge R. Piñon, former president of Amoco Oil Latin America, said foreign oil companies would want to be sure that the profit-sharing contracts would be lucrative before they invested in Mexico since the country would not formally give the companies a share of the oil reserves. “I’m extremely cautious about it,” he said. “The question is will they offer a real competitive option or only offer half of a solution.” Under the Mexican proposal, foreign companies would receive a share of revenues from oil and gas fields rather than the hydrocarbon volumes themselves to sell. Oil companies prefer to be able to report to investors that they have acquired actual reserves for future production, but they have accepted similar agreements in other countries. The Citi Research report noted that depending on how the agreements are negotiated, oil companies might be able to report reserve holdings under Securities and Exchange Commission accounting rules, though Mexico will still insist that reserves are held by the state. Under the rules, reserves that are equal to the value of the cost recovery and revenue earned could be allowed to be listed on company books. Should that be the case, the report concluded, “the results will be revolutionary for the country.”
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