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Oil and gas charts on Mexico

 

 

SAN DIEGO
Petroleumworld.com 01 25 2017

Mexico's energy and economic situation has been a keen focus of mine for over a decade. I wrote my Master's thesis on oil and gas in this great country, my wife is Mexican, and I have lived in Mexico for a number of years. So, let's just say I'm a real big fan of policies that make the U.S. and Mexico MORE connected. I believe Mexico is the most important bi-lateral relationship we have. And it's sad how little Americans, even those with Mexican heritage, actually know about Mexico.

Today, we are seeing Mexican protests against 20% fuel rate hikes, more corruption scandals involving state-owned energy monopoly Pemex, retrograde narco-traffic violence, surging U.S. gas exports to Mexico, and energy reforms in 2013 that will open the door to more outside investment. There are now increasing concerns about Mexico's growth model, too dependent on exports to the U.S. - with an economic decline expected this year. The Peso has now plummeted to 22-1 against the very strong U.S. Dollar (I remember the days when it was 11-1).

Yet, there's still great hope: Mexico has enormous growth potential, as high as there is in the OECD, and Mexico has surpassed Brazil to probably be Latin America's main growth market going forward. The 2013 energy reforms were designed to increase outside investment in Mexico, which has been dominated by state-owned energy companies that stagnated due to not enough money or competition. The goals going forward are clear: more competition, lower costs, more oil and gas production, and developing more "clean energy."

I'd argue don't worry about potential U.S. policies being tossed around that could hurt our relationship Mexico, most of them won't come to pass because access to the growing Mexican market is too critical for our own companies. For example, Mexico now takes in 65% of all U.S. natural gas exports and 60% of all U.S. gasoline exports ( here , here ). Let's be clear and strongly anti-scare tactics: we should be expecting stronger, not weaker, ties with Mexico, as the focus rightfully shifts away from non- or very slow-growth Europe.

Politically, one energy hiccup on the horizon is that current pro-energy reform Mexican President Nieto leaves office in 2018, and the widespread  disapproval of his  performance lowers the chances of a win in 2018 presidential elections for the PRI.  Leftist candidate Andres Manuel Lopez Obrador has consistently opposed energy reform, and could re-install a more nationalistic approach to the energy sector. "Left may win Mexican presidency in 2018: U.S. intelligence."

 



Reporting by Jude Clemente from Forbes.

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