Over the years, Mexico, one of the biggest producers of petroleum and other liquids globally, has transitioned from being a net energy exporter to a net importer of energy.
What Led to the Change?
The import dependence was a result of the steady decrease in oil production that started in 2005. To address the situation, in August 2014, the government decided to deregulate its energy industry and end the 75-year monopoly of Pemex. The ministry of energy in the country, SENER, issued a five year, four round tender plans from 2015 to 2019.
The deregulation was aimed to help the Mexican oil industry become more efficient and draw more investments from abroad as it denationalized 914 oil and gas blocks.
Effects So Far
The benefits of the reform depend on Mexico’s ability, will and transparency in properly implementing the safeguards and regulations keeping in mind the interests of both potential investors as well as the public. As of now, it seems that the new energy law has been able to lure multinational firms to explore oil and gas independently in one of the world’s largest energy markets, or under contract/license with the state oil giant Pemex.
For example, ExxonMobil Corp. (XOM – Free Report) is planning to invest around $300 million in fuels logistics, product inventories, and marketing in the country for the next 10 years. In March 2017, BP PLC (BP – Free Report) opened its first retail fuels site in the country and plans to invest more in the industry over the next five years.
Chevron Corp. (CVX – Free Report) , Glencore PLC (GLNCY – Free Report) , TransCanada Corp. (TRP – Free Report) and other energy related companies also announced their intention to enter the Mexican energy market. These companies will work with local partners to spread their grasp over the market.
Integrated oil majors like Total SA (TOT – Free Report) , Exxon Mobil and Chevron – carrying a Zacks Rank #3 (Hold) – received eight separate blocks from the government of Mexico. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
