Mexico has markedly reduced its oil exploration and production since 2006, despite its rich offshore oil reserves. Now, the Central American country is planning to revitalize its floundering oil industry by looking to foreign investors to fund exploration of offshore reserves, particularly in the Gulf of Mexico.
A recent article published in Offshore Magazine has shown that Mexico has access to a rich oil supply in the deep water of the gulf, but are lacking the equipment and expertise to drill in these deeper waters. Despite its recent downturn in oil production, Mexico has the potential to produce huge amounts of petroleum related products if it is able to tap into its natural resources. In an attempt to reverse the recent decline in the industry, the Mexican government approved an Act to reform energy supplies in the country in 2008. The act is only fully coming into effect now, however, and hopes to encourage foreign investors to provide the resources needed to increase oil drilling efforts.
Included in the act is legislation that bands private individuals from owning hydrocarbons, as well as oil and gas concessions. The legislation also prevents private production sharing cost agreements. There is an incentive package included in the act for experienced contractors who will receive generous compensation and subsidies from the government if they choose to drill in the Gulf of Mexico.
The contractor incentives were put into place last year, in the first of four rounds of contracts that are expected to be released over the next few years. The contracts specifically cover oil drilling potential in the Gulf of Mexico, so that the government can benefit from the expertise of the contractors in the region.
The United States also has significant oil drilling interest in the Gulf of Mexico and most of the drilling activity now occurring are in fact US based companies. The Gulf was highlighted in the media recently when the Deepwater Horizon oil spill and explosion in 2010 caused widespread environmental damage and placed a halt on petroleum industry activities in the gulf until earlier this year.
The Mexican government is keeping environmental factors in mind when assessing the suitability of the gulf for drilling, with a plan to keep track of the geological and environmental effects of drilling in the region, as well as the economic value of the area. Oil production is already on the rise as a result of the new legislation, and it is expected that the Mexican oil industry is set for a turn around.