Canadian Manufacturing

Mexican delegation looks to oil patch companies for investment

Capital is sorely needed as the country's oil output has dropped from 3.4 million barrels a day in 2004 to 2.2 million barrels



CALGARY—Canadian energy companies looking south for new opportunities should cast their eyes beyond the U.S., according Mexican politicians and businessmen attending an event at Calgary’s Petroleum Club.

The delegation, speaking at a forum hosted by the Economic Club of Canada, said Mexico’s energy sector is open for business now that the country has lifted the state monopoly that existed for more than 75 years.

“You are facing a country that has dared to change,” David Penchyna, chairman of the Mexican Senate’s energy committee, said through a translator.

Penchyna said that after so many years without competition or proper investment there now is potential in all areas of the Mexican energy sector, including exploration, production, petrochemicals and transportation.

Investment is sorely needed as the country’s oil output has dropped from 3.4 million barrels a day in 2004 to 2.2 million barrels at present, he said.

Luis Vazquez, chairman of Mexican energy firm Grupo Diavaz, said the country is building 11,000 kilometres of pipelines and will need to build thousands more, but it needs money and human resources to do it.

Jesus Rodriguez Davalos, chairman of law firm Rodriguez Davalos Abogados, said energy and financial services companies will also find opportunity in the country as Mexico continues to reform regulations in the energy sector.

“This reform is one of the most revolutionary economic reforms that we’ve had in the last 25 years,” said Davalos.

He said that thanks to the North American Free Trade Agreement, Mexico has already established a transparent methodology for investment that Canadian banks are comfortable with.

Mexico changed its constitution in 2013 to allow for competition in oil and gas production, but the country’s efforts to embrace the free market have so far been hampered, in part, by the low oil prices affecting the industry globally.

The country held its first open auction for offshore oil leases in July, but only managed to off-load two of the 14 blocks up for sale.

Later this week, Mexico will attempt to sell a second round of oil leases, but these will be more developed blocks, rather than the exploration leases being offered in the first round.

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