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Policy: Environment & Energy

Reforms could boost Mexican oil production 75 percent, says Energy Department's statistics arm

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Politics,Energy Department,Mexico,PennAve,Energy and Environment,Fracking,Zack Colman,Oil,Natural Gas,Offshore Drilling,Enrique Pena Nieto,Shale

Mexican oil production could increase 75 percent by 2040 compared with previous long-term trends as a result of reforms that would let foreign companies develop energy there, the U.S. Energy Information Administration said Monday.

The EIA, the Energy Department's statistics arm, said the opening of Mexico's energy industry for the first time since 1938 could lead to the country producing 3.7 million barrels of oil per day. Last year, the EIA predicted production would plummet to 1.8 million barrels per day in 2025, down from about 2.5 million barrels per day now.

"Although there are many complexities to the new reform and many details that still must be settled before the reforms can take effect, reform is expected to improve the long-term outlook for growth in Mexico's petroleum and other liquids production," the EIA said.

Changes Mexican President Enrique Peña Nieto signed into law earlier this month allow the nation's government entities — in many cases, it will be state-owned oil firm Pemex — to enter into joint ventures with foreign companies. Given Pemex's lack of capital to enter deepwater territory and its dearth of experience with onshore shale, U.S.-based "majors" and smaller, independent drillers that led the hydraulic fracturing, or fracking, boom are poised to benefit.

A key provision of the reform is that foreign companies will be able to count Mexico's reserves as their own under certain licensing and production-sharing arrangements, the EIA noted. That's a key incentive for investment in the sector, it said, as that means publicly traded companies have more to show shareholders.

Peña Nieto is also bullish on the prospects of production gains, writing in the Financial Times last week that the energy reform "creates opportunities for private companies to invest, and improve and expand the sector’s infrastructure."

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Zack Colman

Staff Writer
The Washington Examiner

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