Mexico Hopes to Revive Economy by Opening Oil Sector

Mexico says it expects to generate US$60 billion in investment in its oil sector after opening up its energy sector to foreign firms last week. The oil sector reform is designed to boost the country’s treasury and reduce the monopoly of the state-run oil giant Pemex.

Despite having a vast deposit of oil, Mexico’s oil production has been declining in the recent past, from the peak of 3.5 million barrels a day to 2.5 million barrels a day.

Oil is the major source of revenue for the Mexican government, but a heavy tax burden has tied the hands of Pemex, leaving the state-run firm little or no money to invest in new projects.

The latest reforms, analysts say, will draw deep-pocketed foreign oil firms into the sector. If everything goes as planned, the country will put up its oil fields for tendering in the weeks to come.

The reforms will cut Pemex’ annual tax burden by US$6.85 billion, allowing it to create a competitive atmosphere in the the country’s oil market.

Offshore oil reserves, according to analysts, hold up to 30 billion barrels of oil. In addition, Mexico is estimated to have 545 trillion cubic feet of natural gas in the Burgos basin in the northern part of the country.

With the reforms underway, global oil firms such as Chevron, BP and Shell  have joined the queue to gain a slice of the country’s oil reserves.

It is not yet clear if the Mexican reforms will bring down oil prices in the global market, but analysts say that they will certainly boost Mexican economy, supplying the government with much-needed cash to bolster its waning infrastructure.