Insight – Mexico's need for upstream oil and gas solutions
By Manuel Barbera, Business Development Manager, Austrade Mexico
Mexico’s oil production has taken a 34 per cent dive over the past 10
with the country producing and exporting less crude oil and importing more.
And when it comes to natural gas, Mexico has depended heavily on imports to
meet local demand.
But some analysts now hold the belief Mexico has one of the best energy
futures in Latin America. Recent energy reforms have abolished strict state
controls over the oil and gas (OAG) and electricity sectors. Future
deepwater discoveries are said to be ‘key to pushing Mexico’s production
back to sustained growth into the next decades.’
Mexico is currently the world’s 11th largest producer of petroleum and
other conventional fuels, and the fourth largest in the Americas, after the
US, Canada and Brazil.
Most crude oil reserves are found in the offshore Campeche basin (Gulf of
Mexico) and the onshore basins in the country’s north. The deepwater area
of the Gulf is home to significant undeveloped hydrocarbon resources.
The local industry is increasingly drawing on international expertise to
access these resources and to ramp up production, particularly in shale and
This all leads to significant opportunities for Australian OAG technology,
equipment and services companies to work with the local industry, as well
as new international entrants keen to get in on the action.
Foreign investment activity intensifying
Mexico’s energy reforms have generated a wave of foreign investment in the
upstream sector. Committed investment in exploration and production in the
country surpassed US$161 billion in early 2018.
While the former state-owned Pemex has exclusive rights to produce or
develop 83 per cent of Mexico’s reserves, the remainder is being put out to
bid, including 183 blocks comprising 109 exploration blocks, 60 production
blocks and 14 farm-out blocks.
Shell, Jaguar, Petronas, Total, Eni, Sierra Oil and Gas, Sun God Energy,
Repsol Exploración Mex, Qatar Petroleum, and Premier Oil PLC have secured
blocks to explore and produce oil and gas from shallow water, deepwater,
onshore and unconventional resources. Notably, deepwater has received the
Australia investing in Mexico’s deepwater
Australia’s BHP is already active in Mexico. In 2016, the company acquired
a 60 per cent participating interest and operating rights in
Trion, the deepwater offshore block in the Gulf. Pemex retains a 40 per cent
interest. BHP outbid some of the world’s largest oil companies to win the
Discovered in 2012, Trion is part of a large area of deposits in the
Perdido Trend and is estimated to have reserves of 475 million barrels.
BHP’s winning bid included a cash payment of US$624 million and 4 per cent
additional royalties (on top of the minimum royalty payment of 7.5 per
The investment necessary to develop the field is estimated at around US$11
The deal is significant for both BHP and the Mexican Government as it is
the first joint venture in the Mexican petroleum sector since it was
nationalised more than 70 years ago. Energy Minister Joaquin Coldwell
described it as ‘…a transcendental step that turns Pemex into a 21st
Perdido, however, has particular challenges, including extreme water depth,
rugged sea-floor terrain and low-temperature, low-pressure reservoirs. The
joint venture provides Pemex with much needed deepwater technology.
BHP started exploration drilling in late 2018. Expenditure for FY2018 on
Trion is anticipated to be approximately US$75 million.
Opportunities for Australian companies
Mexico has a well-developed upstream supply chain. However, as Mexican
companies have only worked with Pemex for the past 70 years, they lack
skills, processes and technologies that meet international standards.
Local companies are now looking to partner with international OAG firms to
address these knowledge gaps. This opens up opportunities for Australian
companies to work with local operators and share global best practice.
Additionally, Mexico lacks the expertise and technology needed to develop
deepwater and unconventional energy resources. Its local content
requirements are consequently not too high, compared to other energy
markets in the region.
Niche opportunities for Australian OAG technology, equipment and services
- support equipment and services, from environmental protection and spill
clean-up to helicopters, fire response and security systems
marine seismic exploration services
platform rigs, drill ships, tender assist rigs, jack-ups and
well control and pressure management systems for drilling activities
mooring and dynamic positioning systems for station keeping
- current and vessel hydrodynamics
pipeline construction and maintenance
processing, control, well maintenance and seafloor processing systems for
According to the Mexican Association of Hydrocarbons Companies (Amexhi),
the incoming López Obrador administration will face two main challenges in
the energy sector: increasing oil production and securing natural gas
Reuters reported in August 2018 that the new President may
indefinitely halt exploration and production tenders, and allow Pemex to
directly select its own partners without a tender process. He may also
recommend that Mexico withdraw from the International Energy Agency and
create stronger bonds with the Organization of the Petroleum Exporting
While there are challenges in OAG in Mexico – security issues, corruption
and lack of infrastructure – there are enormous opportunities, particularly
for Australian companies with world-leading capabilities in oil equipment,
specialist technologies and services.
To learn more about the business opportunities and potential in oil and gas
in Mexico and to access Austrade’s business matching services in the
market, contact Ruth Keane,
Trade Adviser and Team Leader, Resources and Energy, in Australia and Manuel Barbera,
Business Development Manager at Austrade Mexico.
1 Emerging Markets Political Risk Analysis, 2018
2 Wood Mackenzie, 2018
3 Energy Information Administration, 2017
4 Roca, 2018
5 Comisión Nacional de Hidrocarburos, 2018
6 BHP, 2017
7 Ker, 2016
8 Reuters, 2018
9 Top Markets, 2017
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BHP Billiton and PEMEX sign agreement for deep-water oil discovery in
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Comisión Nacional de Hidrocarburos. (2018). Esdísticas. Retrieved
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Energy Information Administration . (2017, October 17). Mexico .
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Ker, P. (2016, December 6). BHP Billiton beats 'Big Oil' to Mexico discovery. Retrieved from
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Reuters. (2018, February 2018). BHP Billiton to drill two new deepwater
wells in Trion this year. Reuters. Retrieved from
Roca, J. A. (2018, February 16). Las inversiones de México en la reforma
energética superarán los 200.000 millones de dólares en 2018. El Periódico de la Energía. Retrieved from
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Wood Mackenzie. (2018) A new era for oil and gas in Mexico.