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Mexican reforms pave way open for US oil imports

Energy experts say energy reforms in Mexico will increase the likelihood of the country importing light crude from the US

19.09.2014 - Update : 19.09.2014
Mexican reforms pave way open for US oil imports

By Ovunc Kutlu and Nihan Cabbaroglu

ANKARA 

The path has been opened for Mexico to import oil from the U.S. following the reform of the country’s energy market, according to experts.

Last month Mexico passed legislation to end state-owned Petroleos Mexicanos’ 75-year monopoly in the domestic energy market. The changes allow foreign companies to operate in Mexico and relax regulations surrounding oil imports to the country.

“Mexico has just come through an energy reform, which will give Pemex [Petroleos Mexicanos] more flexibility to run its refineries,” Jorge R. Pinon, director of the Latin America and Caribbean Energy Program at the University of Texas, said.

“In the past, Pemex was only allowed to run its own heavy crude oil. We can see in the near future the U.S. exporting light crude oil to Mexico.”

The oil produced in Mexico is heavy crude, which is harder to refine and more difficult to extract than light crude, although the latter is more expensive. Across the border in Texas, the U.S. produces an excess of light crude.

"If Mexico decides to import light crude oil, it should be U.S. Texas oil because we are right next to Mexico,” Pinon added. “This could very well be a catalyst for the administration to move forward and lift the ban on crude exports.”

The U.S. has had a ban on crude oil exports since the oil crisis of the 1970s, with some small exceptions in the case of Canada and Mexico.

Jason Marczak, deputy director of Latin America Center at the Atlantic Council, a Washington-based think tank, said: “I think that the U.S. and Mexico will work together to place any mechanisms necessary for Mexico to fully maximize the possibilities of the reform.

“If there is something that is going to help Mexico in its reform agenda, then the U.S. will be a willing partner.”

Mexico’s oil production has been decreasing since 2004 due to diminishing supplies in the Cantarell field, once the world’s second largest oil reserve that was producing 2.3 million barrels daily, leading to diminishing Mexican oil imports to America.

As Mexico plans to import light oil it is also trying to increase domestic crude oil production. 

After the energy reform, foreign companies can get a license to explore potential oil fields. Mexico believes that with the necessary state-of-the-art oil and gas technology, undiscovered areas promise large hydrocarbon reserves.

Andrew Holland, an energy expert at the American Security Project, said: “Many of the shale formations that are in Texas go across the border into Mexico.

"I would expect that, instead of importing oil Mexico will be importing drilling rigs and expertise from the U.S. There will be a number of American companies that would go across the border and drill there. So, Mexico has the potential to see the same sort of boom that we have seen in Texas."

The boom in shale oil and gas, also known as the shale revolution, has seen producers utilize previously unreachable reserves and enabled the U.S. to increase its domestic production of oil and gas.

Since the boom in 2008, the U.S. dependency on foreign oil sources has decreased. The U.S. imported 3.6 billion barrels of crude oil in 2008, which fell to 2.8 billion barrels in 2013.

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