Mexico To Sign Oil Reform Today

When Mexican President Enrique Peña Nieto signs a new oil reform into law Friday, it could mark a turning point for Latin America’s second-largest economy, one of Mexico’s leading energy officials told CNBC.

“It’s a magnificent reform,” Mexico’s Energy Undersecretary Enrique Ochoa said in an exclusive interview. Along with many other energy experts, he thinks the law will lead to an increase in oil and gas production, as well as lower energy prices.

The law will change three articles of the nation’s constitution, thereby allowing foreign investment and production-sharing agreements in Mexico for the first time in more than 70 years.

The reform was necessary because the country’s oil and gas model had shown “signs of exhaustion” for years, Ochoa said.

“Oil production had been declining. Gas production had been declining as well. We used to be self-sufficient in natural gas, and now we’re importing a third of our consumption from the U.S.,” he said. “We are importing 50 percent of gasoline in Mexico. We are also importing 65 percent of petrochemicals.”

Mexico’s daily oil production has dropped to 2.5 million barrels from 3.5 million. The problem is not a lack of oil, however, but a lack of money. Mexico produces nothing from the deep waters (below 500 feet) of the Gulf of Mexico, while U.S. producers turn out more than 300,000 barrels per day from that depth in the Gulf.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza