Mexico’s oil and gas sector is undergoing a period of significant transformation, marked by legal reforms that have raised concerns about the independence of the judiciary. These changes, driven by the outgoing president, aim to strengthen executive control over the judiciary, which could have repercussions for the country’s democracy and its trade relations, particularly with the United States. In this context, companies in the sector are calling for increased cooperation to exploit national resources and reduce dependence on foreign fuels.
The reforms, which were ratified by a majority of local congresses, are seen by many experts as a turning point in the country’s governance. At a forum organized by the Wilson Center, Francisca Pou Giménez, a senior researcher at the Institute of Legal Research at the National Autonomous University of Mexico, said:
“The reform will destroy the independence and capacity of the judiciary and erode many of the progress made in this sector over the years.”
This increased concentration of power in the hands of the executive branch could leave some parts of the population unprotected, according to Carlos Ugalde, director of the consulting firm Integralia Consultores. He points out that the real challenge for the bilateral relationship with the United States lies in Mexico’s inability to manage the influence of organized crime on elections.
Call for cooperation
Despite these concerns, private players in Mexico’s oil and gas sector insist on the need for greater collaboration to develop the country’s vast resources. At a national oil and gas convention, participants noted that other countries in the region, such as Guyana and Brazil, have been successful in attracting investment through favorable policies. Craig Kelly, senior director of international government affairs at ExxonMobil, noted that the stability offered by the Guyanese government has been crucial in attracting more than $50 billion in investment in oilfield development.
Opportunities in Mexico are often in hard-to-reach areas, such as deep water, requiring significant investment that companies cannot achieve alone. Stephane Drouaud, vice president of the Trion project at Woodside Energy, said: “We need to identify the key drivers and work together. We can’t do it alone.” The Trion project is currently the only deepwater oil project under development in the country.
Focus on gas
The convention participants also called on the government to explore the possibilities of developing unconventional deposits, especially those related to gas. According to data from the National Hydrocarbons Commission, Mexico has about 110 billion barrels equivalent of prospective resources, of which 65 billion barrels are in unconventional deposits. Marco Vera, GE Vernova’s head of Latin America and the Caribbean, stressed that the country should explore all its options, including unconventional and deepwater deposits.
Mexico’s natural gas production, which stands at about 2 billion cubic feet per day, is primarily used in Pemex’s upstream operations. However, total gas demand in the country is expected to grow at a compound annual growth rate of 1.6% through 2050, according to S&P Global Commodity Insights. This growth will be driven primarily by demand from the power sector, which is expected to reach 8.2 billion cubic feet per day by 2050. As domestic production declines and demand increases, pipeline gas imports from the United States are expected to account for a growing share of total supply.
Challenges and opportunities
Mexico’s growing reliance on natural gas imports poses risks to the country’s energy security. Carlos Pascual, senior vice president for global energy and international affairs at Commodity Insights, warned that “no country in the world, except North Korea, is developing its energy sector solely with government funds.” This underscores the importance of a collaborative approach to mobilizing the investments needed to exploit domestic resources.
Oil and gas companies in Mexico are at a crossroads. While legal reforms could limit their ability to operate effectively, the need for increased cooperation to develop domestic resources is more pressing than ever. Market participants must navigate a complex environment, where political stability and the ability to attract foreign investment will be key to the future of the sector.
