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ExxonMobil, the world’s largest oil group by market capitalisation, is interested in investing in Mexico if reforms of the industry make contract terms more attractive, the company’s chief executive has said.
Rex Tillerson, Exxon’s chief executive, said at a meeting of the Council on Foreign Relations in New York: “We’re hopeful that Mexico, as it continues its pathway to reforms . . . will open up opportunities for greater partnerships and collaborations, and bringing technology to bear on the huge resources that Mexico has.”
His comments came as Mexico’s leading candidate in Sunday’s presidential election
spoke out in favour of long-awaited energy reform, holding out the prospect that the country could follow Brazil’s example in developing a successful oil industry.
Mr Tillerson warned that change was “a ways off yet”, but said Exxon had been working with Pemex, Mexico’s national oil company, on joint studies “primarily so we can get to know one another, and see what each other’s capabilities are”.
He added: “It’s going to be a long process, and what we’re advocating for is just for Mexico to take the next step . . . And if the next step provides an avenue for ExxonMobil to participate, we will.”
Mexico is among the world’s top 10 oil producers, but its restrictive constitution limits the role that private companies can play. As a result, Pemex cannot enter joint venture contracts with third parties that would enable them to share the risks and rewards of exploring for oil.
Mr Tillerson made it clear that Exxon would be prepared to invest in Mexico only if it was allowed to share in the upside and downside of oil and gas prices.
“We’re in the risk business,” he said. “We’re not real keen on service contracts, we’re not real keen on fixed-margin contracts. Although we have some of those, they’re not particularly great for us.”
He said there were many ways that joint ventures could be structured so as to meet the requirements of the US Securities and Exchange Commission for reserves reporting.
“This is not an issue unique to Mexico: the sovereign claim on the resource ownership. There are ways to work through that,” he said.
“What’s more important to us is that our role is described so that we can bring some value. If we can’t add any value to the resource, we don’t need to bring just our financial capacity or people.”
Experts say that Pemex’s lack of capital investment and limited knowhow for drilling offshore in deep waters, where it is understood that the majority of Mexico’s oil reserves lie, was largely responsible for a 24 per cent fall in production between 2004 and 2009. In the past two years, output has stabilised.
In 2008, the outgoing centre-right administration of President Felipe Calderón tried to push for reform in an attempt to reverse that fall. But opposition in Congress produced what ended up being small changes at the margin.
With elections just four days away, Enrique Peña Nieto of the opposition Institutional Revolutionary Party (PRI) has rekindled investor expectations. In an interview with the Financial Times late last year, he said that Pemex “can achieve more, grow more and do more through alliances with the private sector”.
His comments were notable given prevailing attitudes both within Mexico and, in particular, his own PRI party, to the country’s highly protected oil sector.
It was Mr Peña Nieto’s PRI that nationalised the oil sector in 1938 and that for decades afterwards ensured that Pemex remained the country’s sole oil producer, as well as Mexico’s only petrol retailer.
Mr Peña Nieto insisted that it was time Mexico shrugged off old ideologies. “Being hostages to that ideological position has stopped us from taking a much more audacious step and a greater opening up of the energy sector,” he said. “I think we should take it.”