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Reuters via Newscred

Oil prices strike Mexican energy reform

With oil prices below $60 per barrel, the U.S. isn’t the only country affected by them.  Mexico’s energy reform process can expect to take a hit or two, too.

The Houston Managing Director of Korn Ferry, Bruce Peterson, says he expects private investment into Mexico to slow down as the nation opens up to private energy exploration.  This will be the first time in 76 years that the country has allowed private energy exploration.  By doing so, Mexico is eliminating the monopoly of state-owned oil giant Petroleos Mexicanos (Pemex).

Peterson explained how the oil prices may affect Mexico:

With what we’re experiencing in the crude oil market, I’m not sure it (Mexico) is as attractive as it was a few months ago.

In December the Mexican government approved the constitutional changes which allows Mexico to open up to private energy exploration and move away from Pemex.  If everything goes as hoped, the changes will take effect next summer. But Peterson believes that a surge in investments next year is unlikely to happen with low oil prices and the time required for Mexico to build up its energy infrastructure and skilled workforce.

The Houston Business Journal reports that according to Peterson, “The midstream and power sectors may move a little more quickly in order to start propping up the energy infrastructure, but the exploration and production investments will come more slowly. Oil prices and risks involved will make a lot of energy giants and independents more reluctant.”

Yet, Peterson applauded the Mexican energy reform and believes it will help uplift the entire country even though it will be a lengthy process.

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