Mexico’s Oil Sector Eyes Growth With Reform, Tech, Discoveries

Q: Since we last spoke in 2021, how has Citla been progressing with its strategy and where are you focusing your efforts today?

A: The strategy remains unchanged, as we want to build a portfolio of assets that position us as one of the most important and relevant local private players in Mexico. We have delivered a good portion of our exploration plan and today we know which parts of the portfolio we want to preserve to serve as a foundation for the future that we want to build.

Block 7, which was acquired in Round 2.1, is key to our strategy. We already made a discovery there called Yatzil, which is rather significant. Beyond Yatzil, the block also has several prospects located in the same productive formations. The Yatzil discovery has reduced their exploration risk substantially, giving us optionality and a very interesting growth option.

We have decided to concentrate all our efforts on this block to succeed. We have a world-class operator and partner, the largest private operator currently active in Mexico, with deep knowledge of the entire offshore Southeast region. We will be finishing another well by next year, where hopefully we will have a second discovery, and be in a robust position to move into development.

The oil sector is inherently capital-intensive, demanding meticulous technical rigor at every stage. Progress must be paced appropriately to ensure the integrity and success of each operation. That is precisely our approach. We remain fully compliant with contractual obligations and are now poised to deliver a compelling development opportunity for Mexico in Block 7.

Q: How do you assess the impact of the most recent energy reform, and what role has the private sector played compared to PEMEX?

A: Reflecting on the 2014 energy reform, I believe it has not received the recognition it truly deserves. This landmark shift opened the door for private sector participation across Mexico’s hydrocarbons value chain, an unprecedented move that reshaped the industry.

The reform’s first step was a comprehensive review of Mexico’s oil assets. Through Round Zero, the most promising fields, the crown jewels, were allocated to PEMEX. Meanwhile, the more challenging assets, including high-risk and geologically complex exploration areas with little to no prior activity, as well as discoveries previously deemed non-viable by PEMEX, were entrusted to the private sector. These were predominantly exploration blocks, which naturally require time to mature: for geology to be understood, discoveries to be made, and new activity to unfold.

Of the first 43 offshore wells drilled by private operators, approximately 65 percent were dry. This outcome, while often misunderstood, aligns with industry norms in frontier exploration. To date, only two discoveries have reached standalone viability, possessing the critical mass for independent development. The remainder will require integration or synergies to move forward, an inherently complex endeavor. Nonetheless, the private sector has invested billions of dollars to reach this stage, demonstrating both commitment and resilience.

Today, we face a new model of private sector participation, one that diverges significantly from the original framework. Its implementation remains pending, and its effectiveness to be seen. 

I firmly believe the private sector has the capacity to contribute far more than current structures allow. If the invitation to participate exists, I am confident the private sector will respond. But for Mexico to fully harness its vast energy potential, that invitation must be broadened. Mexico's resources are huge, and it requires the joint effort of many to unlock them.
 

Q: What are the main offshore opportunities left from the energy reform?

A: The 2014 energy reform paved the way for several promising offshore discoveries and developments. Among them, Trion, Zama, Amoca-Mizton-Tecoalli,  Hokchi, Ichalkil-Pokoch and our Block 7 stand out as multibillion-dollar projects of remarkable scale. While progress has unfolded quietly, with limited public attention, its execution in Mexico is assured. That is significant, an investment of this magnitude will continue to attract world-class contractors, generate employment, boost production, and catalyze a broader economic virtuous cycle. Our priority is to ensure its successful delivery.

Now, the new scheme for private sector participation launched in 2025 started with a series of invitations via selective processes to chosen projects. Those invited will assess the proposed terms of participation. However, we are still in the early stages. It will take several months to gauge the outcome. If the opportunities and conditions prove attractive, the private sector will engage. If not, the response may be more cautious. 

Q: What role does technology play in the evolution of Mexico’s oil and gas industry, and how does it apply to Citla’s projects?

A: Technology is not merely a tool in this industry, it is its lifeblood. Continuous investment in innovation has enabled breakthroughs that were once unimaginable. Mexico exemplifies this transformation.

The country’s oil sector began with onshore operations in Veracruz and Tabasco, then advanced to shallow-water fields like Cantarell, at depths of less than 100 meters. Today, we are looking at Trion, located in waters approaching 2,500 meters deep, a level of complexity that would have been unthinkable in earlier decades.

Much of this technological capability has been introduced by private companies, while PEMEX has also developed and deployed its own solutions. It is the combined effort, through investment, collaboration, and technical expertise, that has made these advances possible.

In the case of the fields where Citla is a partner, we are operating in benign territory. We are not pushing the boundaries of technological possibility. For instance, Yatzil sits in waters just over 400 meters deep. The technologies required for this environment are well-established and increasingly efficient, though not at the frontier of innovation. That gives us confidence. The risks are manageable, and we operate with a strong sense of security.

Q: What are Citla’s priorities moving forward, and how do you see the company’s role evolving in Mexico’s oil and gas sector?

A: We are essentially placing all our bets on developing the Yatzil discovery and the additional prospects within that block. Once we have that foundation underway, we will begin to look at other areas within Mexico where we can invest. It is likely that Mexico´s upstream sector will experience a consolidation process, where certain players will want to exit and others will want to expand. We are already seeing some of that in Mexico: some companies are leaving, while others are becoming more relevant.

This consolidation process is natural when you move from a very open initial environment to one where, depending on each company’s success, centers of gravity form around certain players. We want Citla to continue expanding its scope into other Mexican fields and to become what I mentioned before: one of the most relevant private Mexican players in the country.

Citla Energy is a Mexican independent exploration and production company. With offices in Mexico City and Houston, Citla is an active participant in the opening of the Mexico oil and gas sector, where it seeks to acquire and build a portfolio of selected onshore and offshore assets, both independently and in partnership with other industry participants.