mexico report 2

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Mexico: Regional Energy Market Report Compromise from the new President could see deepwater flourish

Despite having strong geological potential, particularly in its untapped deep waters, Mexico continues to face a worsening domestic energy situation resulting from a declining reserve base and insufficient upstream capability, compounded by downstream bottlenecks. Faced with this challenging position, steps have been put in place to de-gear the country from current practices with an effort to embrace reform and new methods. A roadmap of continuing in shallow water, combined with a drive into deep plays and a move into onshore acreage has gathered pace since 2013. Driven by international players, a new future for Mexican energy has been set in motion. The new president elect Andres Manuel Lopez Obrador (Amlo) has ordered the postponement of anticipated licensing rounds and the suspension of new acreage offerings until 2021, giving priority to current exploration and development programmes. Despite his aims of energy autarky through a strengthened national operator in Pemex, foreign direct investment is necessary not only from a monetary perspective but also for expertise and risk mitigation. Market liberalisation has started to aid adoption in the form of farm-outs, floating development schemes and limitations on local content. While macro sentiment slows the rate of progress, Mexico undoubtedly has substantial deepwater potential. Eight licensing rounds since 2016 have seen international players increasing or planning to increase exploration activities in deeper water offshore, though subsequent development activities have yet to materialize. Given the right pricing and political environment, this remains a viable avenue for growth....

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