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US, Mexico sign agreement to focus on joint oil & gas projects

July 08, 2013
KEYWORDS oil & gas / pemex
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Steven Frame/iStockphoto/Thinkstock
Photo credit: Steven Frame/iStockphoto/Thinkstock

Joint initiatives between the U.S. oil and gas industry and Mexico will be greatly facilitated by the passage of H.R. 1613 in the U.S. House of Representatives, according to the American Petroleum Institute (API).

This agreement will make it possible for the United States and Mexico's national oil and gas company Petroleos Mexicanos, or Pemex, to further develop resources in the Gulf of Mexico, which will create jobs and enhance energy security in the area, commented API senior director of federal relations Khary Cauthen.

The U.S. oil and gas industry has welcomed the agreement, as it will create certainty for businesses that their production will have a stable market for export and gives them assurance for future investments south of the border. The agreement will also help the two countries make the most of the resources locked in the Gulf of Mexico region and their management.

According to Cauthen, the new rules will mean that any related oil and gas development activities will be exempt from anticompetitive reporting requirements under the SEC 1504 rules. These require U.S. companies to disclose payments to foreign governments for each individual project. U.S. businesses have already made a lot of progress in improving transparency in international trade relations but the SEC reporting rule is an obstacle for the effective competitiveness of American oil and gas companies, since disclosed proprietary information can be used to the advantage of overseas competitors, Cauthen stated.

The American oil and gas industry needs to take full advantage of opportunities presented by new markets, according to the API, which represents more than 500 U.S. oil and gas companies from various segments of the industry. It claimed that the industry supports 9.2 million jobs in the United States and contributes $85 million a day in revenue, making up 7.7 percent of the entire economy.

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Meanwhile, various reports have been highlighting the importance of Mexico as a strategic partner for American oil and gas companies. Since 2008, Mexico has nearly doubled its import of U.S. gas. As export capacity to the United States' southern neighbor is expected to increase to more than seven billion cubic feet per day, Mexico is projected to consume about 10 percent of the total U.S. production.

Exporting natural gas is far less risky and less expensive than exporting LNG and this opportunity could be used to move margins in the North American market. Currently, plans for at least six pipeline projects are in the works and companies hope that they will soon be able to use them to send gas to Mexico.

Mexico's own gas production has fallen since 2008, as the government decided it was more cost-effective for the country to import cheaper gas from the United States than to produce its own gas. Lack of investment in domestic gas production was a key factor in making this decision. However, gas demand is constantly increasing, mostly due to fuel-switching in Mexico's power stations.

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