After years of declining output, Mexico’s energy industry looks like it will be turning a corner in 2014. Legislation was passed in December to end the monopoly long enjoyed by Petroleos Mexicanos (Pemex) and open the industry up to much-needed foreign investment. After the energy bill is ratified by a majority of Mexico’s states (it is expected to pass without a problem), the first licenses for foreign energy companies will be issued in late 2014.
The end of Mexico’s 75-year oil monopoly is a watershed event, albeit a somewhat predictable one given the pressures of an increasingly supply-glutted international energy market. The capital-starved Mexican industry was beginning to look like an anachronism next to its competitors north of the border, and it will need outside technology and investment in order to exploit the country’s full potential (which in terms of shale gas and deep-water reserves is thought to be quite lucrative). Thus, as foreign investment starts to flow into the country’s energy sector (to the tune of $20 billion a year according to some analysts), Mexican output will begin to ramp up. Expect this to have a meaningful impact on global supply beginning in late 2014, because even with the myriad of inefficiencies that dogged the soon-to-be-defunct Pemex monopoly, Mexico is still the 10th largest oil producer in the world between Venezuela and Kuwait. That means there’s plenty of room for improvement.