From the Houston Chronicle

Talos-led GOM discovery putting wind in Pemex sails

Pemex is finalizing a development agreement with a group led by the Houston exploration and production company Talos Energy, which made the discovery last year about 37 miles off the southern Gulf coast of Mexico.

It’s expected to be the first major development to move forward since the constitutional reforms that ended Pemex’s 75-year monopoly in 2013.

“That is going to be a very big milestone in the energy sector in Mexico,” said Carlos Treviño, chief executive of Petróleos Mexicanos, the formal name of Pemex.

Trevino, in an interview with the Houston Chronicle during the Offshore Technology Conference here, said the development comes as Pemex is learning to operate as a global energy company, rather than a state-run monopoly. Pemex, he said, is seeking partnerships with companies from Houston to Norway.

On Wednesday, for example, he met with top Chevron officials in Houston to discuss Pemex’s partnership with the U.S. oil major on a handful of exploration blocks on the Mexican side of the Gulf of Mexico. Afterwards, he met with leaders of Norwegian company Statoil to talk about doing exploration outside of Mexico.

“For Pemex, it’s very important going global,” Treviño said.

Pemex is one of the world 10 largest oil producers, but it has struggled financially is recent years, weighed down by debt, inefficiency and a bureaucratic culture that made it difficult to get things done. As a result, the energy sector suffered from lack of investment, leading to falling production, fuel shortages and other problems, and eventually the decision to open its energy markets to competition.

The opening presents big opportunities for Houston and Texas oil producers, refiners, energy services firms and pipeline companies, which are well-positioned to tap one of the world’s largest markets. Already, for example, pipeline projects are underway to transport natural gas from Texas shale fields to Mexico.

“There’s going to be a lot of work,” Treviño said. “The demand for services we are going to see in the very near future – in one to two more years – is going to be very important.”

Pemex’s first job is unlock new oil and gas reserves in Mexico, which will always remain its top priority, Treviño said. The goal for the Mexican energy sector, he added, is to eventually operate like Houston’s, with a lot of competition and innovation. Companies will have to adapt to changing conditions and competitors or fail, he said.

But whether Mexico achieves that goal could depend on the outcome of Mexico’s presidential election this fall. The front runner is the leftist leader Andrés Manuel López Obrador, who has campaigned on rolling back the energy reforms, including ceasing offshore auctions for international companies and limiting oil and natural gas imports from the United States. López Obrador has also promised to build two new Mexican refineries and freeze fuel prices.

Treviño said such promises will be difficult to keep.

“Trying to build two new refineries before overhauling the other refineries is not a good idea,” he said, and far too expensive. “Trying to freeze the prices is not a feasible thing to do.”

Even if Obrador wins, Treviño said, he is unlikely to have the momentum to enact the changes, some of which would require going through a lengthy and difficult process to change the Mexican Constitiution again.

Treviño said he believes most Mexicans favor Pemex’s new direction. “More production and economic activity is good for the Mexican people,” he said, “and I think people are seeing that.”

Tags: ,

Legal Notice