State of the Industry

Mexico faces a new industry reality managed by a new president and Congress. The country’s autonomous oil and gas regulators (CNH, CRE, ASEA and CENAGAS) will have to work with the new administration to showcase the benefits of an open market and ignite the consolidation phase of the reform. Mexico also needs to take advantage of its geology and geographical position to boost its oil and gas sector, achieve its production and energy efficiency targets and consolidate its position as an international oil and gas investment destination.

Energy Policy & Legal Framework

While most of the relevant aspects of Mexico’s oil and gas policy and legal framework are already working organically and effectively, there are still some details that will need to be assessed by the authorities and put in motion by the industry. There are two aspects that need to be present: geological and commercial success and a strong and clear legal framework to safeguard everyone’s best interests. Mexico should continue bolstering its industry by deleting any legal and policy weaknesses across the


PEMEX started a transformational overhaul in 2017. Today,it must follow clear mandates to improve its operational efficiencies, adjust its cost structure and business strategy to a low oil price scenario and focus on its strongest business divisions, such as E&P, refining, drilling services and logistics. The NOC has put in motion a series of financial and operational adjustments to sustain its current production of 1.8 million b/d and increase it to 2.5 million b/d by 2024, as outlined by the new

Operators & Consortia

CNH ended 2018 with 113 operators participating in the licensing rounds and 107 blocks allocated. Mexico has 73 operators and consortia working on their exploration and development plans. Some are already performing production tests and planning to start commercial production in 2019. Thinking ahead, operators and consortia should be receptive to the new administration’s priorities in terms of updating Mexico’s 2015-2019 five-year E&P bidding plan and prepared to adapt any relevant change to their

Geology & Geophysics

CNH’s hydrocarbons data system shows that Mexico has 1P reserves of 8.483 billion boe, 2P reserves of 7.678 billion boe and 3P reserves of 9.304 billion boe. The same system shows that Mexico’s prospective resources amount to 112.8 billion boe, from which 52.6 billion boe are located in conventional plays and 60.2 in unconventional plays. Adding in the 67 ARES that CNH had granted as of July 2018 and the 21 G&G companies in place, there is no doubt Mexico is taking on a monumental effort to map its

Drilling and Well Completion

Mexico intensified its drilling and well completion activities during 2018. Comparing 1Q17 with 1Q18, the country registered a 54.1 percent increase in drilling equipment operations. Regarding drilled wells, Mexico also registered an increase, drilling 62 wells in 1Q18 versus 24 in 1Q17. From these wells, 52 were completed during 1Q18 and 29 during 1Q17. Looking beyond these numbers, and given the next administration’s commitment to increase production, it is clear that drilling activities will also increase

Field Development & Infrastructure

After finding hydrocarbons and evaluating their commercial viability, field development is probably the most important stage of the life cycle of an E&P contract. CNH has six contracts under development phase (two licenses and four PSCs). Half of these are located in shallow waters and the other in onshore blocks. Adding the fields in development by PEMEX and its partners, it is clear that Mexico has a strong business niche of field development operations and oil and gas-related infrastructure.

Production & Mature Fields

Mexico’s short-term mandate is to increase production from 1.8 million b/d to 2.5 million b/d in safe and cost-efficient ways. EOR and IOR techniques will be fundamental in mature fields to achieve this goal. CNH and operators should continue working together to evaluate the best production technique to put in place, according to the specifics of each field. Doing so will guarantee Mexico’s objective of not only increasing oil and gas production, but doing it in a sustainable, cost-efficient and safe manner

Supply Chain & Local Content

Mexico has a strong oil and gas supply chain that was born and built around PEMEX’s requirements. The challenge for the chain is to comply with the requirements of IOCs and independent operators that are making their way into Mexico’s upstream sector. This means adapting each lesson learned  and implementing best international practices in every activity or business niche. Doing so should allow Mexico’s supply chain to comply with local content requirements in every stage of the life cycle of E&P

Industrial Safety & Environmental Performance

Safety is a core value present and regulated in every aspect and activity of the oil and gas industry. Similarly, the industry’s entire value chain should have a friendly and outstanding environmental performance, not only as a matter of principle, but keeping in mind ASEA’s regulatory framework that pushes for ever more cleaner processes. In this regard, Mexico is prepared and aligned with international best safety and environmental practices to safeguard every activity involved in its oil and gas industry

Technology & Innovation

Mexico faces a variety of challenges. One clear example is the country’s efforts to tap its deep and ultra-deepwater oil and gas potential. Another is its’s unconventional resources potential or even its mature fields’ niche. In every corner of the country’s oil and gas industry there is at least one challenge waiting to be solved. Each challenge will require an innovative perspective to provide the industry with the disruptive technology that will become essential for high-tech operations.

Natural Gas Value Chain

Mexico is located in the region with the cheapest natural gas price per molecule in the world (US$2.8/BTU): North America. Mexico is also in the midst of the largest-ever expansion of its natural gas pipeline network, extending it from 11,000km to 18,000km. Whether Mexico decides to boost its natural gas production from conventional or unconventional plays, or its natural gas imports from the US, the country’s value chain surrounding this hydrocarbon should be receptive enough to seize every possible

Refining, Storage & Retail

AMLO's administration wants to invest MX$49 billion to modernize the existing refinery network. CRE has approved 24 new storage projects and is revising another nine; and PEMEX will revamp its existing terminals and even build new ones. These efforts have one strategic goal: bolster fuel reserves up to five days. Finally, Mexico’s retail sector has over 45 new retail brands which operate 11,992 service stations as of 1H18. The game is afoot in refining, storage and retail as the segment primes for growth. 

Industry Outlook

Mexico needs to continue moving forward with respect to previous efforts already in motion. Analysts agree some parts of the regulatory and commercial frameworks could and should be improved, but none of these efforts should be stopped or canceled, and policymakers, regulators and industry players are expected to be receptive to local and international trends. The value chain has learned to work with low oil prices and is trying to introduce better practices, technologies and services with a cost-efficiency



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Foreign investment has started pouring into Mexico’s oil and gas industry, unlocked by nine licensing rounds following the 2013 Energy Reform championed by President Enrique Peña Nieto. As PEMEX celebrates its 80th anniversary, it finds itself reborn as a productive enterprise of the state competing with international oil companies in what was once its exclusive domain. With significant new discoveries being made by both PEMEX and private operators, the first steps toward reversing Mexico’s declining production have been made.

Mexico’s midstream and downstream markets are also being reshaped. The country’s natural gas pipeline network is growing rapidly, with significant storage capacity on the drawing board. At the end of the chain, the liberalization of fuel imports and the end of PEMEX’s distribution monopoly has resulted in a wave of national and foreign-branded gas stations replacing the traditional PEMEX colors and offering consumers more choices at the pumps.  

Mexico’s next president will be instrumental in shaping the future of the Mexican oil and gas industry and operating environment for all players across the value chain. Continuity is the buzzword as both international and domestic players demand the country follow the road it paved with the Energy Reform, particularly as a new presidential administration, and the inherent uncertainty that implies, prepares to take the reins of power. The pages that follow will outline the story of an industry in the midst of change, but one which is optimistically moving forward.