Market Overview

Big Oil Sees Big Opportunity In Mexico Oil Deregulation

Big Oil Sees Big Opportunity In Mexico Oil Deregulation

The next frontier for big oil is just across the U.S. border, in Mexico.

As Bloomberg recently reported, the prospect of up to $20 billion a year in foreign investment prompted the Mexican Congress to overturn a 75-year old law banning foreign oil companies from drilling in the country.

If approved by Mexico's state legislatures, the law will give oil and gas companies such as Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), Apache Corp (NYSE: APA), BHP Billiton (NYSE: BHP) and ConocoPhillips (NYSE: COP) access to the largest unexplored oil fields south of the Arctic Circle.

Mexico is the world's ninth largest oil producer, and oil production in Mexico is dominated by the government-owned oil company Pemex. Pemex's production has been falling in recent years.

Major U.S. oil and gas fields, such as the Permian Basin and the Eagle Ford Shale, have seen massive increases in drilling and production in recent years.They extend across the border into Mexico, BHP Billiton's head of petroleum Tim Cutt told Reuters. Billiton has been making major investments in North America gas and oil in recent years.

Political observers in Mexico, meanwhile, think state legislatures there will pass the required changes to Mexico's charter because most of them are controlled by allies of President Enrique Pena Nieto and his PRI party. Pena has made economic liberalization one of his main goals.


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