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Mexican firm aims to source shale oil from U.S.

August 19, 2013

The oil industry has historically been reasonably valuable to Mexico's economy, but in the past decade a variety of troubles have brought it into a difficult spot. Petroleos Mexicanos (Pemex), the country's primary oil company, is state-run, and as a result political concerns have often taken precedence over the business's bottom line. This has occasionally led to scandal. However, recent developments are indicative of a changing direction for Pemex and the industry as a whole.

According to The Wall Street Journal, Pemex is setting up a division in the United States that will focus on cultivating shale gas and deep-water oil from American natural resources. As this could be the sign of additional international business ventures within the sector, foreign oil industry leaders may be discussing the implications in conversations conducted using international calling cards.

Calculated but risky gamble
The news source reported that Pemex CEO Emilio Lozoya is spearheading the initiative. This is being perceived as an ambitious move - Lozoya has only run the company for one year and previously worked as an investment banker. The novice chief executive outlined the plans in a recent interview.

"Pemex will be starting a new company that will work on the shale gas and shale oil fields in the U.S. and in the deep-water side of the U.S.," Lozoya said to the source. "The geology is similar and we can benefit from numerous areas of collaboration with international oil companies."

Given the declining rate of Mexican oil production - a drop from 3.4 million barrels per day to 2.5 million over the last 10 years - a strategy that opens Mexico up to foreign collaboration could be well-appreciated by foreign industry contemporaries.

Nationalized energy industry monopoly coming to an end?
The latest move by Pemex ties into a larger strategy of the Mexican government's Institutional Revolutionary Party (PRI), which was announced last week. According to the Dallas Morning News, Mexican President Enrique Pena Nieto proposed that foreign investors should be given access to Mexico's oil reserves, and if the reforms are instituted, Mexican energy entrepreneurs may be able to start their own oil businesses independent of Pemex.

Nieto's proposal will not allow for unfettered capitalistic development within the energy sector. For one, foreign firms will be unable to own the Mexican oil reserves even if they are allowed to drill in the nation. However, Pemex would be open to profit-sharing agreements with international firms.

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