The oil and gas industries are best prospect sectors that offer opportunities to U.S. exporters/manufacturers of equipment and service providers. U.S. companies should target private sector companies in the market as well as Pemex (Mexico’s government-owned petroleum company). This section includes a market overview for equipment and services and trade data for the sector.
Overview
Mexico is one of the largest oil producers in the world (with 1.6 million barrels produced daily in 2022), and the fourth largest in the Americas after the United States, Canada, and Brazil. In 2022, Mexico ranked 13th globally in crude oil production, 21st in crude oil reserves, 16th in refined capacity, and fifth in logistics infrastructure. In 2022, the United States imported over 637 million barrels of Mexico’s heavy crude and exported over 1.8 billion barrels of refined petroleum products to Mexico. This represents more than 72 percent of Mexico’s domestic gasoline, diesel, natural gas, and jet fuel consumption. Oil is a crucial component of Mexico’s economy. Earnings from this industry accounted for almost 20 percent of total government revenues in 2022 according to Pemex and the Secretariat of Treasury and Public Credit.
Significant oil reserves have been confirmed in Mexico by major oil and gas companies operating in Mexico, and efforts to upgrade existing logistics infrastructure will likely drive private sector investment and provide opportunities for U.S. companies, either as contractors, sub-contractors, or suppliers of equipment and/or technology. However, under the current administration, private sector participation has been limited by the Secretariat of Energy and the energy regulator (the Comisión Reguladora de Energía or CRE). Private oil companies in Mexico are expected to reduce exploratory activity due to the expiration of exploration plans and the cancellation of contract allocation rounds. Secretary of Energy Nahle stated in June 2023 that there would be no subsequent oil rounds for new areas.
Table 1: Mexico Upstream Oil and Gas Market Overview
(Figures in USD Billions)
|
|
2020 |
2021 |
2022 |
2023 (Est.) |
|
Total Local Production |
1.85 |
1.89 |
1.90 |
1.91 |
|
Total Exports |
1.84 |
1.84 |
1.86 |
1.87 |
|
Total Imports |
6.38 |
6.45 |
6.57 |
6.64 |
|
Imports from the U.S. |
4.49 |
4.68 |
4.86 |
5.05 |
|
Total Market Size* |
6.40 |
6.50 |
6.61 |
6.68 |
|
Exchange Rates |
20.20 |
20.28 |
20.12 |
18.40* |
*Total market size = (total local production + imports) – exports
Source: Secretariat of Economy, interviews and information from officials of Petróleos Mexicanos (Pemex), the Secretariat of Energy (SENER), and National Hydrocarbons Commission (CNH), Mexican Association of Hydrocarbons Companies (AMEXHI), ONEXPO, Mexican Natural Gas Association (AMGN), College of Petroleum Engineers, Mexican Petroleum Institute (PMI) contractors and importers
Mexican Energy Reform
In December 2013, Mexico amended its constitution to allow both local and foreign private investment into the energy sector for the first time since its nationalization in 1938. The reforms permit international energy companies to operate in Mexico and include provisions for competitive production sharing contracts and licenses. The measure increased the demand for technology and technical expertise for the development of upstream, deep water, and shale oil and gas fields. The energy reform also allows for greater private investment in retail fuel distribution.
At the end of 2018, the Secretariat of Energy (Secretaría de Energía or SENER) completed the revision of the investment plans of the 107 contracts awarded during 2015-2018 to private companies. In 2018, the Agency for Security, Energy and Environment (Agencia de Seguridad, Energía y Ambiente or ASEA) also completed its review of environmental permit and land rights applications. However, the López Obrador administration, which has been skeptical of private investment in the energy sector, suspended pending upstream bid rounds upon taking power in December 2018 and has not announced plans to restart the auctions.
While the López Obrador administration has indicated it will respect the legal framework of the energy reform, it has enacted a series of regulatory changes that have negatively impacted private sector participants, particularly in the midstream and downstream sector, to the benefit of parastatal Pemex. In April 2021, the Mexican Congress modified the Hydrocarbons Law to give the Government of Mexico (GOM) broader powers to review and suspend existing import, commercialization, and distribution permits for all hydrocarbons.
The GOM has repeatedly increased its efforts to strengthen Pemex. In February 2021, for example, Mexico granted new fiscal support worth USD 3.5 billion to strengthen the oil company’s finances. In addition, in 2023 Pemex was authorized a budget of USD 32 billion to continue upgrades to the six existing refineries which remain top priorities, purchase the Deer Park refinery in Texas, and continue investing for the completion of the new Pemex refinery (estimated for July 2025) located at the Dos Bocas Port in the state of Tabasco.
Pemex’s Structure
Pemex operates through two main divisions: Pemex Exploration and Production and Pemex Industrial Transformation. Pemex Industrial Transformation controls the national gas, refining, and petrochemical businesses and affiliated companies (Drilling, Logistics, Fertilizers, Ethylene, and Cogeneration and Services). Pemex International (PMI), Pemex’s international business development subsidiary, purchases and sells fuel and basic petrochemicals, but not equipment.
To participate as a supplier to Pemex, companies must first complete the registration process at the Pemex Procurement International (PPI) website. Companies that wish to become registered suppliers must submit copies of their articles of incorporation, audited financial statements, and commercial and financial references. As of April 2023, PPI had over 8,000 registered suppliers, over 70 percent of which were U.S. firms.
A number of private sector oil and gas contractors that were awarded land, shallow water, and deep water projects contracts from the Mexican Energy Regulatory Commission (CRE) from 2015 to 2018 started implementing their investment plans in 2022 and have continued in 2023, including: BPH; BP; Murphy Energy; Chevron; ExxonMobil; Diavaz; Grupo R; INPEX; Total; Premier Oil; Petrobal; Hunt; Grupo Mexico; Jaguar; Petrofac; Lukoil; and Hukchi Energy. These companies will invest an estimated USD 18 billion from 2021 to 2024 to purchase seismic services, exploration, drilling and extraction equipment, including platforms and related services for 794 wells. Talos Energy won a crude oil field contract to drill the ZAMA Field (Gulf of Mexico) in 2015, a field which it found. However, in 2023 the company sold 49 percent of its participation in the Zama Field to Grupo Carso after years of disagreements between the GOM and Talos over how to proceed with the project.
Mexican Regulatory Agencies
The National Hydrocarbons Commission (Comisión Nacional de Hidrocarburos or CNH) is responsible for regulating, overseeing, and evaluating all hydrocarbons exploration and production activities in the country. The CRE is responsible for granting permits for importation, commercialization, transportation, and storage of crude oil, gasoline, diesel, lubricants, and new gasoline stations. ASEA is responsible for approval of the environmental and land use permits before exploration, drilling, and extraction activities can begin, including the construction of new gasoline stations and natural gas infrastructure. SENER is responsible for processing social impact assessments, which are mandatory for most major upstream, midstream, and downstream activities including the construction and operation of pipelines, storage facilities and refineries, as well as retailing and distribution. Private sector participants across the sector have expressed concerns that CRE, ASEA, and SENER permits have been chronically delayed, in some cases by over a year, as part of a broader government strategy to block private investment and favor Pemex.
Gas Market Overview
Mexico has an estimated 17 trillion cubic feet (Tcf) of proven natural gas reserves. Natural gas is increasingly replacing oil as a feedstock in power generation. However, higher levels of natural gas consumption will likely depend on more pipeline imports from the United States or liquefied natural gas (LNG) imports from other countries. Mexico has an estimated 545 Tcf of technically recoverable shale gas resources, the sixth largest in the world. The true potential of accessing and developing shale gas in Mexico is hindered by the low availability of required technology and the accessibility of low-cost U.S. natural gas, and a presidential proclamation barring the practice. However, Mexico has encouraged domestic natural gas production by inviting private companies to bid on new natural gas pipelines and storage facilities for imported U.S. natural gas.
Leading Sub-Sectors
The demand for imported upstream oil and gas equipment and services is expected to increase by two percent from 2022 to 2023, with a four percent increase in U.S exports. Private oil and gas contractors will continue to drive market growth to comply with award schedules set by CRE for shallow water, onshore, deep water, and heavy oil and gas projects.
In the next few years, there will be opportunities in the upstream subsector for U.S. companies to sell technology and services to the major oil companies that have bid on the shallow water tenders. Equipment needed includes derricks for oil and gas fields, drilling equipment for oil and gas fields, Christmas tree assemblies, drilling rigs, oil and gas field drilling machinery and equipment, as well as engineering services.
Opportunities
Pemex’s investment plan for 2021-2025 includes 399 new exploration, extraction, and production projects in shallow deep water, and onshore projects in the states of Tamaulipas, Veracruz, Tabasco, and Campeche, including the upgrade of 25 platforms, the installation of pipelines for the Trans-Isthmus Corridor (300 kilometers from Coatzacoalcos Port, State of Veracruz to Salina Cruz Port, State of Oaxaca), and the completion of eight interconnections to the existing shallow water platforms in the Gulf of Mexico. These significant projects will create new opportunities for U.S. suppliers of relevant equipment, technologies, and services.
The opening of the upstream oil and gas market will provide opportunities to sell technology and services to private contractors and Pemex. These opportunities include upgrading six existing Pemex refineries, upgrading 77 Pemex storage facilities for crude oil, gasoline, diesel, and lubricant, and modernizing over 5,000 Pemex gasoline stations. Current Pemex tenders require a Mexican local content of 25 percent reaching 35 percent by the end of 2025. When there is no local production, the local content requirement may be waived. U.S. suppliers and investors are encouraged to monitor progress and seek out opportunities that may include joint ventures, production sharing contracts, and/or concessions.
Equipment and services with greater demand include high pressure/high volume pumps; hydraulic submersible pumps; filter pots; auxiliary fuel tanks; seismic services; trenchers; plows; boring tunneling machinery; mud mixing systems; mud recycling systems; vacuum trucks; pile drillers; operating separators; desilting equipment; and field gathering lines.
Resources
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Secretariat of Energy (SENER) |
|
|
Energy Regulatory Commission (CRE) |
|
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Petróleos Mexicanos (Pemex) |
|
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College of Petroleum Engineers of Mexico (CIPM) |
|
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Pemex Procurement International (PPI) |
|
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Natural Gas Mexican Association (AMGN) |
|
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Centro Nacional de Gas (CENAGAS) |
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Mexican Association of Hydrocarbons (AMEXHI) |
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Events
- OTC 2024, May 5-9, 2024. Houston, TX
Contacts
For more information on the oil and gas sector in Mexico, please contact:
Francisco Cerón
Commercial Specialist
U.S. Commercial Service —Mexico City
Tel.: +52 (55) 5080-2000 ext. 5211