Energy reform is so close for our southern neighbors you can practically taste the Mexican crude. After passing the two-thirds test in Mexico’s legislature, the historic suite of energy reforms had to win the approval of the majority of Mexico’s states, a hurdle it passed early this week. The bill now heads back to Mexico’s Congress for a final box-check before heading to the desk of reform-minded President Enrique Peña Nieto, who has already promised to sign it. After so many months of build-up and political wrangling, barring some unforeseen legislative hiccup it looks like Mexico’s stagnating energy sector will open itself up to much-needed private and foreign investment. The question now is: who will win the fight to explore this new market?Much of Mexico’s potential for growth lies trapped in its shale formations; to this end, American firms—which have so far had the most success in fracking shale—will likely blaze the trail. But as the WSJ reports, oil-hungry Asia is eagerly eying this new source of North American energy, and will be close on the heels of these US companies:
State companies from India and China will likely be in the second wave of investors, said Mr. Karev of Deloitte. “They will be more likely to invest mostly in conventional oil projects where there is an established and fluid market, where you don’t need big infrastructure in pipelines and possible export terminals and long time frame, such as shale gas,” he said. […]Chinese companies have plenty to offer in terms of experience, as well as money. They’ve invested heavily in North American oil and gas reserves or buying companies there, spending more than $44 billion in the U.S. and Canada since 2008, according to Dealogic.
Whichever firms are successful at carving out a spot in this new market, Mexico will be the real winner. Citigroup’s Ed Morse believes these reforms could as much as double the country’s oil production, no small feat when you consider that Pemex, Mexico’s state-owned oil monopoly, has overseen a 23 percent decline in output since 2004. Welcome to the North American energy boom.