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The miracles of modern engineering and specifically, fracking and deepwater drilling are rapidly changing the risk -reward assessments of petroleum investment.  When OPEC members meet today Vienna, OPEC is scheduled to offer its latest assessment of global demand and projected production, while closer to home U.S. oil titans align with Mexico’s Pemex to secure access to new crude oil...     

As we reported more than a year ago, there’s good reason for Mexico’s newfound optimism and popularity.  Pemex, the state-run oil monopoly and world’s fourth largest producer had just discovered three deep-water deposits in the Gulf of Mexico, with an estimated 26.5 billion barrels of crude oil. And there’s no doubt about the high quality of that crude.

So it shouldn’t have surprised anyone when California-based Chevron quietly became the first major international oil producer to partner with state-run Pemex following the landmark legislation that Pemex passed last year.

As Bloomberg reported, Mexico passed an energy law last year that ended Pemex’s 75-year production monopoly to allow private companies to tap into the country’s 13.4 billion barrels of proven oil reserves.  Mexico’s energy ministry estimates that private investment is expected to generate an additional $30 billion annually. 

With the exceptions of Royal Dutch Shell and BP, Chevron produces more crude from the U.S. section of the Gulf of Mexico than anyone else and with the quality of the crude in Mexico’s court, Chevron is seeking exploration opportunities in deepwater, shallow water or shale.

Exxon has also negotiated a technical collaboration agreement with Pemex and it stands to reason that additional firms may join the waiting line of suitors.  High quality crude at prices potentially well below Brent or WTI is too attractive to resist.  And in the long run, U.S. consumers could benefit as Pemex oil further diversifies available options for U.S. refineries that may yield savings at the pump too.