MEXICO CITY— Royal Dutch Shell PLC has some natural advantages as it looks at Mexico’s opening to foreign oil firms in exploration and production, including a 20-year partnership at a Houston oil refinery with national oil firm Petróleos Mexicanos and decades of experience producing oil and gas on the U.S. side of the Gulf of Mexico, the company’s Upstream Americas Director Marvin Odum said on Thursday.
Shell operates oil fields in the deep waters of the Perdido Fold area on the U.S. side of the Gulf, not far from an area on the Mexican side of the waterway where Pemex, as Mexico’s national oil company is known, has found significant resources and is looking for partners.
“We basically built, developed and operate the Perdido development,” said Mr. Odum. “That, potentially, is an advantage in these circumstances. We bring not only a broad set of skills but a very specific set of skills that might be very close to some resources that have been discovered on the Mexican side.” Shell also has been in Mexico for 60 years, he added.
Mexico’s energy overhaul, signed by President Enrique Peña Nieto into law this year, is designed to draw foreign and private oil firms for the first time in 76 years to help the country increase a decade of falling production. As Mexico runs out of what officials here have called “easy oil,” the government is seeking partnerships to operate in more complicated areas such as the deep waters of the Gulf, where longtime monopoly Pemex has no production.
Shell, on the other hand, has three decades operating on the U.S. side of the Gulf and currently is the top producer there. “I think the history that Shell has in the Gulf of Mexico of course should be able to be translated very directly into the Gulf of Mexico waters for the country of Mexico,” Mr. Odum said.
While Mexico has very attractive deep-water areas that have been underexplored relative to the U.S. side of the Gulf, Shell is also looking at other areas in resource-rich Mexico. “We will look seriously at the other opportunities, whether shallow-water offshore and some of the onshore opportunities,” Mr. Odum said.
Even in a climate of low oil prices, Mexico remains attractive because projects such as those in the deep-water Gulf won’t come online for many years and the price environment in the future will be taken into account when considering those investments, the Shell executive said. However, Mexico will still have to compete with the other 70 countries Shell operates in at a time of tightening cash flow, he added.
Mr. Odum said that Mexico’s energy overhaul and its implementation have been moving very quickly and smoothly, but it is important the government get the details right even if the timeline slips a little. “I’d put myself in the category of being impressed with the scale and the depth and the pace of the reform,” he added.
Mexican authorities are currently working on “model contracts” that will include specific rules that regulators expect to use in the final contracts during the country’s first tender under the energy overhaul next year.
One detail that regulators need to get right, Mr. Odum said, is the percentage of national content—goods and services that must be locally sourced by the winners of tenders to explore and produce Mexican oil and gas.
“When requirements for local content are set, they need to be realistic to make it a workable solution, but also to see that as a huge opportunity for Mexico,” Mr. Odum said. Mexico is one of a few countries where Shell has a sourcing office to channel services and equipment to the company’s other operations around the world, he said.
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