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.”
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