With Mexico about to drop state-controlled Pemex’s oil and gas monopoly, some are asking if production from Mexico, the US and Canada will flood the world market?
The Mexican Senate approved the first comprehensive oil and gas reform legislation in 75 years, voting to allow foreign investors to take part in Mexico’s $95 billion-a-year oil industry.
Under the 1938 constitution, Pemex was given a monopoly over the oil and gas industry, and foreign capital was banned.
Mexico crude production has fallen to less than 2.5 million barrels per day.
The country’s production peaked in 2004 at of 3.4 million barrels per day.
Analysts think a revived oil and gas sector in Mexico could eventually pump 5 million barrels per day.
The US Energy Information Administration thinks US production by 2016 could hit 9.6 million barrels per day.
And Canadian production by 2016 is expected to hit 8 million barrels per day.
North America production, even if Mexico’s production doesn’t grow as much as expected, could soon exceed 20 million barrels a day — or more than twice Saudi Arabia’s production.
The Mexican reform bill still needs ratification by state assemblies. But that’s expected to happen soon.
The reform could bring $15 billion a year of investment to Mexico’s lagging oil and gas sector, according to JPMorgan Chase & Co.