Mexican oil production at a crossroads
As newly-elected conservative Mexican President Felipe Calderón and U.S. President George W. Bush searched in Mexico City for some kind of grand bargain on oil and immigration this past March, the governments of Alberta and Mexico signed an energy cooperation agreement that could well position Alberta’s private and public sectors at the forefront of efforts to revitalize Mexico’s energy industry – particularly if both Calderón and Bush deliver on their joint commitments
The agreement defines four main objectives: establish a framework of cooperation for mutual benefit on energy matters; encourage cooperation and understanding between Mexican and Albertan energy sectors to promote common goals; learn from each other’s best practices, regulatory regimes and expertise; and encourage collaboration in energy education through the development of specific programs.
“There is tremendous potential in Mexico’s energy sector and significant opportunities exist for us to work together and learn from each other,” commented Mel Knight, Alberta Minister of Energy.
He would appear to be right. With annual two-way trade in 2006 near $1.35 billion, Mexico is Alberta’s fourth largest trading partner. The province’s exports to Mexico were up 15 per cent in 2006 over 2005 and up 700 per cent since the 1994 implementation of the North American Free Trade Agreement (NAFTA). At least 25 energy-related Alberta companies are active in Mexico in the pipeline, drilling, service, and electricity sectors.
The agreement, though, is a suggestion that both jurisdictions are preparing for the eventual glasnost of Mexico’s energy sector, especially in the areas of enhanced oil recovery (EOR) techniques, extraction of unconventional natural gas (i.e. coal bed methane), joint ventures in exploration and production as well as capital investment.
And according to several government officials in the U.S., Canada and Mexico, Canadian E&P firms and investors might be better received than their American counterparts as players in the Mexican oil sector because most Mexicans do not harbor suspicions against Canadian intentions towards Mexican petroleum assets.
In fact, the Declaration validates a 2005 statement by Ramirez-Corzo, head of PEMEX’s Exploration and Production, that Mexico “needs to establish a technology alliance with countries that have experience.” A Mexican administration searching for the most effective and efficient energy sector models need not look beyond Alberta to find the most successful application of energy development in the world, including cutting-edge petroleum extraction and exploration methods. Mexican authorities may well want to consider how Alberta has effectively dealt with controversial issues ranging from the establishment of an oil trust fund, to creating circumstances that would allow local companies to successfully compete with their giant American counterparts, to the formulation of effective oil & gas royalty regimes. The lessons derived could be of invaluable assistance to Mexico as they look to reestablish their country as a major oil producer for decades to come.
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