WASHINGTON — Key details of Mexico’s overhaul of its energy industry will come into focus on Wednesday, when longtime oil monopoly Pemex learns which fields it gets to keep for future exploration.
By week’s end, the Ministry of Energy will announce areas to be opened to foreign investors in an initial round of bidding to take place early next year, Mexico’s ambassador to the U.S., Eduardo Medina Mora, said Tuesday.
“There is very strong interest across the board,” he told a handful of reporters at the embassy near the White House.
Just how much of Pemex’s current holdings the company gets to keep remains unclear for now. It asked for “a lot,” the ambassador said.
President Enrique Peña Nieto pushed through constitutional amendments last year that ended 75 years of state control over the energy sector. Last week, the Mexican Congress approved legislation to put the reforms into effect.
“This is not a minor change,” Medina Mora said.
The Mexican government had until mid-September to decide what fields Pemex will retain. At a signing ceremony for the energy laws on Monday, Peña Nieto announced an expedited schedule. Mexico estimates it has 90 billion barrels of oil and natural gas reserves, ranking it among the world’s top producers.
Mineral deposits are publicly owned in Mexico. But the country lacks the infrastructure to exploit deepwater fields in the Gulf of Mexico and shale deposits like the Eagle Ford Shale in South Texas. Pemex oil production has dropped more than 20 percent in the last decade, to 2.4 million barrels a day.
To unleash the potential, foreign investment is viewed as critical, though it will come with some upheaval and uncertainty.
“We need more resources, different technologies and a much more decentralized approach. ... We need — you name it — geologists, petroleum engineers, welders, regulators,” Medina Mora said.
Mexican authorities have no idea how much revenue will eventually roll in. Licensing fees collected in this and later rounds of bidding will probably be modest compared with the royalties collected later, as new fields are developed and older fields are squeezed for more production, thanks to advanced technology that currently is out of Pemex’s reach.
Bidding will take place during the first quarter of 2015 for fields identified this week for the first round, Medina Mora said. That gives foreign and Mexican entities time to assess the geology and risks.
There will be several rounds of bidding, reflecting the complexity of the many areas of Mexico ripe for exploration.
He couldn’t predict who will bid, or when or where drilling might begin. But he speculated that drilling probably would start in established fields, such as the shallow waters of the Bay of Campeche, where the risks and geology are relatively well known.
He also predicted high interest in the shale formations south of the Rio Grande near the Eagle Ford formation.
“It is only natural,” he said.
Deep-sea drilling involves greater investment and risk, he noted, so that probably will come later.
The former attorney general, who was deeply involved in the drug war under former President Felipe Calderón, acknowledged that would-be foreign investors are eyeing the security situation in northern Mexico. But he said, “when you have investment and equipment and people, you can sustain the security effort. I don’t think that’s going to be a major concern.”
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