Mexico Oil Privatization will Result in “Profound Changes”
For the first time since 1938, Mexico’s oil frontier is open for business. Mexico’s newly privatized oil industry was officially signed into law on August 11, 2014, ending Petróleos Mexicanos’ (Pemex) 76 year nationalization reign on the country’s hydrocarbon resources. Pemex provides roughly one-third of Mexico’s tax revenue, but years of corruption and inefficiency have cut sharply into its production. The company has lost roughly $8 billion to date in 2014, according to Reuters. Volumes for Q2’14 dipped to 2,468 MBOEPD, and management expects overall output for 2014 to average 2,441 MBOEPD. If the numbers prove to be accurate, production will have declined by 36% since 2004 (3,848 MBOEPD), or an annual average of roughly 140 MBOEPD. If the entire ten year period is considered, the lost production of 1,407 MBOEPD is roughly equal to Q2’14 volumes produced by both Apache Corp. (ticker: APA, 636 MBOEPD) and Occidental Petroleum (ticker: OXY, 741 MBOEPD).
