Energy Industry Investment Expected to Start Flowing into Mexico in Late 2015

laht.com

MEXICO CITY – The funds generated by the auctions of rights to the first 23 oil fields being offered to investors, estimated at $21 billion, should start flowing into Mexico by the fourth quarter of this year, Energy Secretary Pedro Joaquin Coldwell said Monday.

“These are investments not in the hundreds (of millions) but in the billions of dollars,” Coldwell told Radio Formula.

The first contracts in Round One will be granted starting on July 15, with signing of the deals taking place “around August, September at the latest, and the investments will start arriving in the fourth quarter of this year,” the energy secretary said.

The Mexican government is offering 23 of 169 blocks in the first two phases of Round One, opening the door to private investment in the energy industry after 76 years of state control.

The first phase of Round One includes 14 shallow-water exploration blocks in a 4,222-sq.-kilometer (1,630-sq.-mile) area off the coasts of the southeastern states of Veracruz, Tabasco and Campeche.

The government estimates that $16.7 billion in investment will flow into these fields over the next five years, creating 168,000 jobs.

The nine remaining fields to be awarded are located in a 281-sq.-kilometer (108-sq.-mile) area off the coasts of the southeastern states of Tabasco and Campeche, and contain reserves estimated at 671 million barrels of oil equivalent.

These fields are expected to attract $4.48 billion in investment and lead to the creation of 44,000 jobs.

“Much investment is flowing into Mexico right now,” Coldwell said, citing the national pipeline system currently under construction as an example.

President Enrique Peña Nieto’s energy industry reforms opened Mexico’s oil and gas sector to private investment for the first time since 1938.

Expectations, however, have been dampened by the plunge in oil prices.

The government said in January that it would cut public spending by $8.02 billion, or 0.70 percent of the gross domestic product (GDP), in an effort to deal with the effects of falling crude prices.

The cuts include a reduction of about $4 billion in the budget of state-owned oil giant Petroleos Mexicanos, or Pemex, forcing officials to hold off on several planned projects, including deepwater exploration.