Mexico looks abroad as oil reforms stay distant

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Lajolla, May 17: Barred from inviting foreign companies to help develop its own oil sector, Mexico might go abroad itself to produce oil and gas in places like Peru and Bolivia, energy minister Fernando Elizondo said on Monday.

Heavily dependent on oil for its economy and struggling to develop new oil and gas fields at home due to limited funds and technology, Mexico could boost its output through partnerships elsewhere in the region, he told Reuters in an interview.

Such a move would mark a sea change for state oil monopoly Pemex which, unlike global oil behemoths in the private sector, has always limited production activities to its home country, due to its tight investment budget.

"One of the options for Pemex to ensure higher output is, paradoxically, to go to another country, because in other countries it can form alliances in production," Mr Elizondo said during a Latin American energy conference in La Jolla, California.

Mexico’s Congress has blocked reforms that would allow Pemex to form alliances with foreign companies to exploit its deep-water resources.

Exploring for oil in Peru could lead to oil projects onshore or in shallow water, compared to the extremely costly and technologically challenging deep-sea projects needed to unlock most of Mexico’s undiscovered oil sources, he said.

In Bolivia, which Mexico named this month as a potential supplier of liquefied natural gas to fill a domestic shortage, another possibility being considered is a partnership so that Pemex could play a part in extracting the gas, Mr Elizondo said.

"Pemex could join forces with a private company, produce the gas there and send it back here," he said, adding it was a slightly "ridiculous" scenario given that Mexico has its own reserves it is unable to fully exploit.

Pemex desperately needs foreign help to explore potentially huge deep-water oil deposits as output from existing oil fields starts to decline. Aside from the technology it lacks, Pemex says deep-water projects would require an additional amount of $15 billion per year.

Single-handed, Pemex is also unable to produce enough natural gas to feed a steadily growing demand. Mr Elizondo and Brazilian energy minister Dilma Rousseff told the energy conference they were keen to forge a partnership in Mexico that would bring Pemex the technological know-how of Brazilian oil company Petrobras in deep-water exploration.