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Oil & Gas Industry in Mexico Could Open to Private Investment

13 September, 2012

According to Bloomberg Businessweek,Mexico’s oil and gas industry is likely to open up to private investment for the first time since 1938. Mexico real estate is home to the third-largest oil reserves in Latin America,and selling shares in Petroleos Mexicanos (Pemex) – the nation’s largest oil supplier to the U.S. – is expected to revive the industry.

Mexico’s oil production has experienced several years of declining output as a result of declining investment and outdated technology in recent years,but the new investment money generated by private investment dollars could turn this around – and quickly. 

“The cash can fund Gulf of Mexico and shale gas production using techniques Brazil and the U.S. employed to revolutionize their energy markets,” Bloomberg reported.

Both of the frontrunners in Mexico’s 2012 presidential race have issued statements recently expressing their support of private investment in its oil and gas industries,and Pemex has long been lauded as a symbol of the country’s sovereignty and a source of national pride. 

Despite its outdated technologies in certain areas and lack of growing investment dollars,Pemex has expanded exploration and has more than quadrupled its investments over the last ten years,reaching around $23 billion annually. Now,the potential for a Pemex IPO is expected to attract new investment dollars and increase the appeal of Mexico’s stock exchange. 

In order to allow Pemex to begin operating less like a government agency and more like a business,tax law changes will have to take place. Recent polls suggest that 47 percent of those surveyed would support a measure allowing the Pemex IPO.

“This is the first time the topic is discussed in a presidential campaign,” Jorge Chabat,a political science professor at Mexico City’s Center for Economic Research and Teaching told Bloomberg. “If the new president arrives with a mandate,it should be enough to mitigate any opposition in congress.”

Topics: Investment Industry