Petróleos Mexicanos (PEMEX,) Mexico’s state-owned oil company, has announced a record $28 billion of investment for the 2014 fiscal year. It is expected that the vast majority of money invested (approximately 85%) will go towards production and exploration for new oil fields.

The $28 billion figure is 10% higher than last year’s level of investment, which amounted to $25.3 billion, of which $19.3 million went to production and exploration of crude oil and gas fields. Despite this increase over last year’s investment level, PEMEX CEO Emilio Lozoya Austin claimed that in order to develop the country’s resources to their maximum potential, a further $32 billion would need to be invested.

In late 2013, Mexico’s legislature passed a bill permitting foreign companies to invest in PEMEX, a groundbreaking move that was not previously allowed since the company’s nationalization in 1938. This permission comes amidst flagging levels of oil production and Mexico hopes the move will boost its productive capacity.

While levels of PEMEX investment have increased steadily from 2008 onward, levels of oil production fell from 2.79 barrels per day to 2.54 million barrels a day in 2012, and levels of gas production fell from 7,030 cubic feet per day to 6,900 cubic feet per day over the same time period.

In 2008, PEMEX reported a production of 43.5 billion barrels per year, while in 2013 it reported 44.4 billion barrels per year. This slight increase can be attributed to the discovery of six new oil fields that added about 180,000 barrels per day at the end of 2013.

PEMEX is responsible for funding approximately one-third of Mexico’s national budget, with much of the revenue going towards social programs that improve education and infrastructure throughout the country.

Additionally, PEMEX hopes to increase exploration of deep waters in the Gulf of Mexico and improve its technological innovation in shale extraction through its newly minted partnership with the Russian oil giant Lukoil earlier this year.

– Jeff Meyer

Photo: Huffington Post
International Business Times, El Economista, Oil Price

The Russian-owned petroleum company Lukoil has signed a landmark deal with Mexico’s state-owned oil company Pemex to search for and extract petroleum. This is the first deal signed by Pemex since Mexico decided to open up its energy sector to foreign investment in order to increase its efficiency and production capabilities.

Mexico had previously banned foreign presence in its energy sector in 1938. Last December, however, the Enrique Peña Nieto administration pushed through legislation lifting the ban and opening up the industry for foreign partnerships.

Pemex has faced falling investment that subsequently dropped its production levels down from a high of 3.8 million barrels a day in 2004 to 2.6 million barrels a day in 2013.

PEMEX revenues account for one-third of the national revenue of Mexico, and Mexico is deeply dependent on PEMEX revenue for social programs such as education, hospitals and roads.

Deposits of shale throughout the country continue to go untouched due to lack of investment, and it is hoped that this deal with Lukoil will change that. Lukoil is expected to engage Mexico to advance the development of shale gas reserves and exploring deep-water areas.

Lukoil is the second-largest private oil company worldwide by hydrocarbon reserves and provides Russia with 18% of its total oil production. It is also second only to Exxon Mobil in proven oil and gas reserves, and earns approximately $139 billion in revenue and $11 billion in net income.

After failing to obtain new deposits in Russia and left with few opportunities to expand within Russia, Lukoil and PEMEX are working together in an attempt by Lukoil to capture the newly available Mexican market. Lukoil’s CEO, Vagit Alekperov, said the agreement would help “bolster [Lukoil’s] operating and technological capacity.”

Lukoil will also provide Pemex with expertise in the field of environmental protection knowledge. This deal is good for Mexico in that it will allow for increased production over flagging levels, and may signal an inflow of further investment in Mexico’s energy sector by foreign firms.

– Jeff Meyer

Sources: RT, BN Americas, ReutersOil Patch Asia, USA Today