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U.S., Mexico Expand Energy Ties

The United States and Mexico will expand their energy ties, the two countries’ energy ministers said after a meeting in Mexico. The Associated Press quoted U.S. Energy Secretary Rick Perry as saying Mexico was “a very, very important partner” in energy.

The meeting comes ahead of a renegotiation of the North American Free Trade Agreement, which, according to Perry, did not cover the energy sector when it came into force in 1994. The renegotiation, he said, should make the entire region a powerful energy source for the world.

Perry’s Mexican counterpart, Joaquin Coldwell, for his part, said that Mexico plans to build two new pipelines that will boost U.S. natural gas exports to its southern neighbor. This will bring the total gas pipeline export capacity from the U.S. to Mexico to 19. The AP notes that Mexico accounts for 58 percent of the U.S. gas exports and 40 percent of crude oil exports.

The additional export capacity will be needed: a recent announcement from finance minister Jose Antonio Meade said that by the end of the year, Mexico’s crude oil production could slip below 2 million barrels daily. This would be the lowest output level since 1980. According to Meade, 2017 production will average 1.947 million bpd, down 9.6 percent on 2016. In 2019, however, production will begin to recover, he said.

Related: Macquarie: OPEC Deal To Collapse In 2018

This decline in production—a result of underinvestment and field depletion—is the basis of a recent increase in efforts to stimulate new discoveries. Earlier this week, the country’s oil and gas regulator announced the successful close of two onshore oil and gas exploration auctions that saw 21 out of 24 new blocks awarded to several companies.

Meanwhile, however, Canadian Renaissance Oil Corp., which operates the Ponton onshore field, said it had approved a force majeure for the field because of an environmental dispute. The field was previously operated by local state major Pemex.

By Irina Slav for Oilprice.com

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