Mexico’s Privatization Futures | OutPut by Rig Lynx – OutPut
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Mexico’s Privatization Futures | OutPut by Rig Lynx

Earlier this year, oil and gas statisticians in Mexico marked a historical first, for on 23 March officials at the National Hydrocarbons Commission (CNH) created a buzz in the market by including “251 million barrels of oil equivalent (boe)” in national reserves discovered by private exploration and production companies operating their own prospection blocks.

While positive, keen-eyed observers were quick to note that Mexico’s headline reserves figure was in the region of 8.5 billion boe, implying that less than 3% of the proven reserves were in private hands. Furthermore, the CNH acknowledged that the reserves position was down 7% on an annualized basis compared to the same month last year.

And if you look purely at crude oil reserves, total privately held reserves are actually around 1%, because Mexico is “still learning to crawl, let alone walk” when it comes to courting the private sector investment needed to boost its standing, according to Carlos Morales-Gil, Chief Executive Officer of PetroBal.

To the uninitiated, PetroBal is Mexico’s first private sector oil and gas exploration company founded by tycoon Alberto Bailleres Gonzalez in 2015, following the historic privatization reforms introduced that year.

Since then, Mexico has seen 9 licensing rounds with 107 awarded contracts carrying an impressive 67% success in terms of contract execution.

“Don’t get me wrong, planning has been very well done and the pace of reform is impressive. This imparts a lot of transparency and there is much to be proud of,” Morales-Gil told delegates at the Baker McKenzie Oil & Gas Institute in Houston, Texas, USA, on Thursday (10 May).

But the Mexican industry captain also opined that it was now time to accelerate things further. “Mexico is a country with social challenges. So the value of our natural resources needs to be realized more efficiently, and monetized quicker. We are a welcoming market; for instance the OECD classifies Mexico as ‘Number One’ in Latin America as an economy open for investment.

“That welcoming attitude must transfer more meaningfully to the oil and gas sector. The challenge the government is facing is the speed of entrants from the private sector, and how to adapt to that. Farm-outs have been executed successfully but systemic problems and red tape remain.

“For instance, in the U.S. it took us two weeks to get a drilling permit. Such a time scale is unimaginable at the moment in Mexico. Furthermore, [state-owned] Pemex, which until 2015 had an absolute monopoly, is on its own learning curve following its loss of monopoly.”

“Finally, If liberalization still remains the objective, we [private companies] also need open access to infrastructure built by Pemex,” Morales-Gil concluded. (continued on page 2)

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