BMI View: Mexico's historic energy sector liberalisation mark s the start of a fundamental shift for the country's hydrocarbons sector. Although it will b e a number of years before results are felt in the country's production and reserves data, over the long term t he reforms will bolster upstream activity and reverse a decade-long decline in oil production.
|e/f = BMI estimate/forecast. Source: EIA, BMI|
|Crude, NGPL & other liquids prod, 000b/d||2,882.4||2,779.5||2,635.2||2,522.9||2,449.3||2,463.2||2,487.9|
|Refined products production & ethanol, 000b/d||1,438.0||1,440.9||1,383.2||1,397.1||1,411.0||1,439.3||1,482.4|
|Refined products consumption & ethanol, 000b/d||2,044.7||1,966.4||2,005.7||2,045.8||2,097.0||2,149.4||2,203.1|
|Dry natural gas production, bcm||46.4||46.7||47.1||48.1||48.6||49.3||50.3|
|Dry natural gas consumption, bcm||64.6||66.5||69.8||74.7||80.7||84.7||87.7|
Notable trends in the Mexican hydrocarbon sector include:
In December 2014 the government announced the start of the historic Round One licensing auction, marking the official end to the 76-year monopoly of state-owned oil company Pemex and ushering in a new era of greater productive potential. A lower oil price environment will likely temper initial investor interest, though we still expect vast below-ground resources to draw significant investment from international oil companies (IOCs).
Mexico's first international licensing round is expected provide a geological mix of 169 prospective blocks as part of an international bidding process. The areas to be offered will comprise two areas in deep waters, areas of shale gas, parts of the non-conventional Chicontepec (basin) and shallow water blocks.
We believe Mexico's deepwater tenders will attract the strongest investor interest given the size and scope if the resources on offer. Their development will support a sustained level of output growth over the latter half of our 10-year forecast period.
Pemex has requested an exemption to the US ban on crude exports by asking permission to import 100,000 barrels per day (b/d) of ultra-light crude to blend with domestic heavier grades as a means of improving efficiencies at its heavy refineries in Salamanca, Tula and Salina Cruz. In return, the US would import Maya crude into its heavy-oriented refineries on the Gulf Coast, increasing total Mexican imports from their average rate of 803,000b/d in 2014.
In September 2014 Pemex announced a USD5.5bn spending plan, which offered significant new opportunities to foreign players in Mexico's mid- and downstream sectors. However, Pemex's 2015 USD4.0bn spending cut will undermine efforts to increase refining capacity of ultra-low sulphur diesel in favour of maintaining upstream production targets.
The development of natural gas pipelines in Mexico will generate continued investor interest over the next several years as the country increases imports of US natural gas. Given our positive economic growth outlook, Mexican demand for natural gas will continue to rise over the course of our forecast period sustaining gains for the midstream infrastructure sector.