US Companies Eye Opportunities in Mexico's Upstream Sector

US companies have numerous opportunities to sell upstream oil and gas equipment and services in the Mexican market, says the US Department of Commerce.

According to estimates from the US Department of Commerce, Mexico imported upstream oil and gas equipment and services valued at US$6.77 billion in 2022, representing a year-on-year growth of 5%. Mexican production of these equipment and services amounted to US$1.94 billion during the same period, a 2.6% increase. The corresponding exports amounted to US$1.89 billion, reflecting a 2.7% rise.

PEMEX's investment plan for 2021-2025 covers 399 new exploration, extraction, and production projects in shallow and deep waters, as well as onshore projects in the states of Tamaulipas, Veracruz, Tabasco, and Campeche. This includes the enhancement of 25 platforms, the installation of pipelines for the Interoceanic Corridor (involving the 300km from Puerto Coatzacoalcos, Veracruz, to Puerto Salina Cruz, Oaxaca), and the completion of eight interconnections to existing shallow water platforms in the Gulf of Mexico.

The US Department of Commerce states that these projects can increase sales of US equipment, technology, and service providers. The opening of the upstream oil and gas market will provide opportunities to sell technology and services to private contractors and PEMEX. These opportunities include the modernization of six PEMEX refineries, 77 crude oil, gasoline, diesel and lubricant storage facilities, and over 5,000 service stations.

PEMEX tenders now require a Mexican local content of 25%, which will reach 35% by the end of 2025. When there is no local production, the local content requirement can be waived. Therefore, the Department of Commerce encourages US suppliers and investors to monitor progress and seek opportunities, which may include joint ventures, production-sharing contracts, and concessions.

Moreover, PEMEX recently revealed a substantial boost in its 2023 upstream CAPEX budget. The newly established budget stands at MX$240 billion (US$13.4 billion), a significant increase from the MX$162 billion (US$9.05 billion) allocated in 2022. These investment plans were disclosed in PEMEX's latest annual report, submitted to the US Securities and Exchange Commission in late April.

A significant share of this budget, about MX$44.4 billion (US$2.48 billion), has been earmarked for the offshore Ku-Maloob-Zaap complex. This allocation is nearly double the previous year's budget for the complex. As of March, Maloob and Zaap ranked as the top two oil-producing fields in Mexico. The CNH reported that these three locations also held fourth, fifth and seventh place in natural gas production.

The second-highest allocation in the 2023 upstream capital budget is dedicated to the onshore Ixachi natural gas and condensate field. This field has played a critical role in sustaining Mexico's gas production despite the decline of PEMEX's mature fields. The NOC has allocated a CAPEX budget of MX$19 billion (US$1.06 billion) to Ixachi, signifying a substantial increase from the MX$5 billion (US$287 million) assigned in the prior year. In March, Ixachi ranked as PEMEX's second-leading natural gas-producing field, with the top position held by the onshore Quesqui field.