As Obama visits Mexico, the slippery topic of oil comes up

U.S. President Barack Obama (C) walks past an honour guard upon arrival at Benito Juarez International Airport on May 2, 2013 in Mexico City. Obama landed in Mexico on Thursday at the start of a three-day trip that will also take him to Costa Rica, with trade, U.S. immigration reform and the drug war high on the agenda.

President Barack Obama is in Mexico today, meeting with that country’s leader Enrique Peña Nieto. They’ll be talking immigration, border security and trade. But analysts say their conversation will likely turn to one touchy topic: Oil and gas reserves in Mexico. Twenty years after the North American Free Trade Agreement, Mexico’s oil reserves have remained closed to U.S. investment, but that may soon be changing.

There’s pretty much one brand of gasoline you’ll see in Mexico: Pemex, the state fuel monopoly. But Pemex is in trouble. Mexico’s oil production has been dropping, and in less than 10 years, the country could be importing more oil than it exports.

Analysts say the fossil fuel reserves are there. Mexico remains one of the world’s top 10 oil producers. There could also be tens of billions of barrels in untapped deep-sea oil reservoirs.

The country has, ”The proven fourth largest shale gas reserves in the world,” said Michael Shifter is president of Inter-American Dialogue.

Shifter said Pemex lacks the technology to tap those reserves. International companies have the expertise, but Mexico’s constitution prohibits joint ventures in the sector. Shifter said reforms maybe on the way.

”I think if there are joint ventures, U.S. companies would be very attracted to the opportunities in Mexico,” he said.

Arturo Sarukhán, who was Mexican ambassador to the U.S. until January, said he expects Mexico to introduce oil and gas reforms in July or August this year.

”This is a big strategic game changer,” said Sarukhán, who is now the chairman of Global Solutions, a consultancy within the Podesta Company.

He said those joint ventures could change the oil and gas game globally.

”By bringing Mexico’s energy assets to the table, overnight Canada, Mexico and the United States become the largest producer of oil on the face of the earth, far outstripping Saudi Arabia,” he said.

That should ensure that oil and gas keep flowing for years to come.

About the author

Jennifer Collins is a reporter for the Marketplace portfolio of programs. She is based in Los Angeles, where she covers media, retail, the entertainment industry and the West Coast.

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