Adding another Nigeria to world oil supply
By Joe Carroll and Bradley Olso
The flood of North American crude oil is set to
become a deluge as Mexico dismantles a 75-year-old barrier to foreign investment in its oil fields.
Plagued by almost a decade of slumping output that has degraded Mexico’s
take from a $100-a-barrel oil market, President Enrique Pena Nieto is seeking
an end to the state monopoly over one of the biggest crude resources in the
Western Hemisphere. The doubling in Mexican oil output that Citigroup Inc. said
may result from inviting international explorers to drill would be equivalent
to adding another Nigeria to world supply, or about 2.5 million barrels a
day.
That boom would augment a supply surge from U.S. and Canadian wells that Exxon Mobil Corp.
(XOM) predicts will vault North American production
ahead of every OPEC member except Saudi Arabia within two
years. With U.S. refineries already choking on more oil than they can process,
producers from Exxon to ConocoPhillips are clamoring for repeal of the export
restrictions that have outlawed most overseas sales of American crude for four
decades.
“This is going to be a huge opportunity for any kind of player” in the
energy sector, said Pablo Medina, a Latin American upstream analyst at Wood
Mackenzie Ltd. in Houston. “All the companies are going to have to turn their
heads and start analyzing Mexico.”
Unprecedented Output
An influx of Mexican oil would contribute to a glut that is expected to
lower the price of Brent crude, the benchmark for more than half the world’s
crude that has averaged $108.62 a barrel this year, to as low as $88 a barrel
in 2017, based on estimates from analysts in a Bloomberg survey. Five of the
seven analysts who provided 2017 forecasts said prices would be lower than this
year.
The revolution in shale drilling that boosted U.S. oil output to a 25-year
high this month will allow North America to join
the ranks of the world’s crude-exporting continents by 2040, Exxon said in its
annual global energy forecast on Dec. 12. Europe and the
Asia-Pacific region will be the sole crude import markets by that date, the
Irving, Texas-based energy producer said.
Exxon’s forecast, compiled annually by a team of company economists,
scientists and engineers, didn’t take into account any changes in Mexico,
William Colton, the company’s vice president of strategic planning, said during
a presentation at the Center for Strategic and International Studies in Washington on Dec.
12.
Opening Mexico’s oilfields to foreign investment would be “a win-win if
ever there was one,” said Colton, who described the move as “very good for the
people of Mexico and people everywhere in the world who use energy.”
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