EIA predicts 75 percent increase in Mexico’s oil output

Mexico’s actions to end its state monopoly on oil and natural gas will spur a “profound” increase in country’s oil production, raising it by about 75 percent by 2040, the U.S. Energy Information Administration (EIA) predicted.

Mexico’s president signed a law Aug. 11 to end Petróleos Mexicanos’s 75-year oil and gas monopoly and invite foreign investment. It is one of the energy reform measures championed by President Enrique Peña Nieto.

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“Although there are many complexities to the new reform and many details that still must be settled before the reforms can take effect, reform is expected to improve the long-term outlook for growth in Mexico’s petroleum and other liquids production,” the EIA said in a Monday post.

The agency now predicts that Mexico will produce 3.7 million barrels of oil per day in 2040, compared with 3 million barrels per day in 2010. After falling slightly in 2015, output will grow each in each five-year period the EIA studied, the agency said.

The forecasts contrast with decreases that the EIA had previously predicted. Before the reforms, the EIA said oil production in Mexico would fall for the next decade, bottoming out to 1.8 million barrels a day in 2025, and then it would “struggle” to stay between 2 million and 2.1 million barrels in 2040.

The EIA attributed the new growth largely to new contract structures that energy companies will be allowed to use under the reform plan.

“The production-sharing contracts and licenses will effectively allow foreign companies to account for reserves, which is a particularly attractive incentive for investment in Mexico's energy sector,” EIA said. “Different contract types will likely be applied according to the degree of risk associated with specific projects.”

The new projections will become part of the annual International Energy Outlook, which the EIA plans to release in September.  

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