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
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
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.