South of the Border, Down Mexico Way: The Past, Present, and Future of Petroleum Development in Mexico-Part II
MetadataShow full item record
In 2003, the Government of Mexico was facing the challenge of declining production of oil from its producing fields, in particular from the Cantarell field. Another problem faced by the government was the growing demand for natural gas, which had outstripped the country’s gas production. Exploration and development opportunities for Mexican gas were many, but the necessary capital was not available for Pemex, Mexico’s state-owned oil company, to pursue them. Mexico had embedded in its Constitution the right to develop its oil and gas industry for its own benefit without foreign participation, but now, ironically, it was importing natural gas from the United States while domestic supplies remained undeveloped. The government, then under the leadership of Vicente Fox of the National Action Party (PAN), sought to break through the limitations imposed by the constitutional provisions that prevented private participation in Mexico’s oil and gas industry. The government asked Pemex to find a way to make this happen. An effort was made by Pemex to reach out to international oil companies (IOC) to find a way to permit them to invest in Mexican oil and gas opportunities. IOCs express interest but wondered how the government planned to structure an investment in the face of Mexico’s constitutional and legal restrictions. Fox’s administration and Pemex not only faced the strictures of the Constitution, but also the opposition of the other major Mexican political parties, the Institutional Revolutionary Party (PRI) and the Party of the Democratic Revolution (PRD). Consequently, any initiative to invite IOCs to invest in Mexico would have to occur without constitutional or legislative change. Indeed, the government’s early experiences with enactment of new regulations resulted in court challenges initiated by PRI and PRD legislators, the government sought new investment in oil and gas without revisiting the regulations. Part I, published in another journal, reviews the history of petroleum in Mexico – much of it unhappy – as a reminder of the long and tortuous pathway that led to Mexico’s current initiative to open its petroleum sector to foreign investment.