“All Eyes On Mexico,” reads the latest headline from Forbes covering Mexico’s landmark energy reform legislation, which passed in late 2013 and will be finalized over the next two weeks as lawmakers release details surrounding how the reforms will be implemented.
“Prior to the reforms, Mexico had [one of] the most closed energy regimes of any country in the world,” writes Forbes. “This is not going unnoticed in the U.S. and abroad, and with good reason.”
Mexico is strategically located, sharing thousands of miles of borderland with the U.S., and it is easily accessible from Canada, as well as a variety of other developed nations that are eager to obtain energy independence from the Middle East and other suppliers. In addition, Mexico is expected to have the capacity to produce 54.6 barrels of conventional oil and 60.2 billion barrels of unconventional oil, according to figures released by Petroleos Mexicanos (PEMEX), which is the state-run body that governs the nation’s substantial and largely untapped energy resources. Also of note, there is word that a provision in NAFTA that previously excluded Mexico’s energy sector from the terms of the agreement may no longer apply, opening up another vast array of new opportunities for investors worldwide.
Although questions remain surrounding expropriation, booking reserves, details of joint ventures with PEMEX and even seismic data, there are likely to be a wide variety of opportunities emerging in the immediate future involving various parts of the support network portion of Mexico’s oil and gas supply chain.
“With an eye on participating in Mexico, US offshore support vessel operators are already talking about joint ventures, and at least one Mexican company is looking for investors to fund its entry into the market,” writes Forbes. “Energy reforms also removed PEMEX’s monopoly over distribution, storage and related areas.”
Specifically, Mexico has plans to build a number of new gas pipelines to power throughout the nation in an effort to provide more affordable electricity for its citizens and businesses. In fact, Forbes reports that NET Midstream has already obtained a Presidential Permit to begin construction on a $665 million pipeline, spurring a flurry of serious interest from U.S. infrastructure and private equity funds, which are eager to get in early on these historic investment opportunities, and causing them to also look at other new ways to invest in Mexico’s thriving economy.
“Several specialized energy funds are expected to enter Mexico, and more could be created by both national and foreign investors,” writes Forbes. “Increased production onshore or offshore will likely require a massive build-out in gathering, processing and long-haul pipelines.”
Former Mexican president Vicente Fox already announced one of these specialized energy funds in mid-2013, managed by private energy firm Energy and Infrastructure Mexico (EIM Capital) and totaling at least $500 million in assets to date. In addition, there are Master Limited Partnerships (MLPs) in the U.S. that have been working to get in on the action, and 2014 is expected to bring at least a record $27.7 billion to Mexico’s oil and gas industry.
Other new investment opportunities that are expected to bolster Mexico’s already booming economy, which is busily driving gains in a variety of other sectors from telecom to real estate, include the iShares MSCI Mexico Investable Market Index (EWW) and the Mexico Fund (MXF). Both are broad-based and provide ongoing exposure to the Mexican economy for a variety of both large and smaller individual investment portfolios, according to NASDAQ.
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