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Deepwater oil exploration within the Gulf of Mexico is vital to the Mexican energy industry. Lacking the security threats of onshore exploration and generally more favorable geology, offshore exploration in the Gulf nonetheless presents a costly and at times dangerous production climate—especially when compared to the burgeoning American shale industry.

The United States consumes nearly two-thirds of Mexican oil exports, but Mexico is increasingly reliant on imported natural gas and light/sweet crude oil—most of which is sourced from the United States. As the growth in U.S. shale output continues – and more important, as the cost of producing that U.S. shale crude continues to drop – Mexico’s energy industry will continue to struggle to compete for investment into the offshore oilfields that supply nearly 70% of total Mexican oil output.

Petroleos Mexicanos (Pemex), Mexico’s state-owned energy company, has dominated the country’s nationalized energy sector for decades. But declining output and the need for investment and technology have resulted in recent constitutional reform aimed at attracting outside investment. The overall pace of reforms will remain glacial, but moving Mexican production technology out of the 1970s will help reverse systemic field decline and introduce something nearly unheard of in terms of Mexico’s oil industry: stability.

 

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