Mexico's Oil Industry Makes First Move Toward Opening Up After 75 Years
Mexico, now with oil!
Once upon a time, Mexico was more than a land of cheap tequila, drug violence and border issues. Back in the day, it was oil country, and oil industry types from all over the United States and the rest of the world flocked to Mexico because of all the slick black crude discovered beneath the soil.
The Mexican government went along with it all for a while, but eventually the fervent nationalism that caused so many countries to reach out and take back control of their oil industries hit Mexico. It all ended in 1938 when President Lázaro Cárdenas informed his cabinet he intended to take the oil industry away from the foreign companies that were currently running it. (Spoiler alert: He totally did.)
Unsurprisingly, the companies that had developed the Mexican oil fields didn't take kindly to losing all control of what they viewed as their property. It ultimately ended with nationalized Mexican oil and since then the country has run its own oil industry, often sloppily, Daniel Yergin argued in his epic tome on all things oil, "The Prize".
And that's how things have stood for 75 years, but now it looks like there could be real change on the horizon. While Cárdenas got major points for tossing the foreigners out, President Enrique Peña Nieto is looking to bring the foreigners back in. He's been working on opening Petróleos Mexicanos, the national oil company, to foreign oil companies for months, and now it appears that might actually happen.
Nieto has been pushing this hard and now the first glimmer of a deal has been struck, with two senators from Mexico's biggest political parties agreeing to allow output-sharing contracts and licenses for outside producers (basically the first step in Mexico being open for business again.)
On Monday morning, the senators presented joint legislation to allow ExxonMobil and Chevron to set up shop in Mexico's oil fields, according to Bloomberg. They'll mostly be focused on shale plays, which have remained largely untapped on the Mexican side of the border.
The congressional session is slated to end December 15, but it will likely be extended if the bill hasn't made its way through the legislative process yet. The legislature will also have to make a more general adjustment to the Mexican Constitution, which currently says it's illegal for anyone but the state to own so much as a barrel of oil. Obviously, that will have to be changed up before Exxon and Chevron lead the way across the border because everyone knows that oil companies don't make a move if they don't actually own the oil they're bringing up.
Either way, after more than a decade of everyone on this side of the border staying out of Mexico, and after generations of the oil industry being firmly locked out, it looks like they'll be opening their doors again. So you'd best start putting in your cheap tequila orders to your oil friends, because some of them may soon be Mexico-bound.
Meanwhile, Big Oil has kept up the fight against the move made toward requiring disclosure of specific payments made to foreign governments to get oil companies in the door. Translation: If anything happened behind the scenes to get Mexico interested in hanging out with foreign oil companies again, we'll never officially know about it. But the cheap tequila and oil will be flowing.