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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Oklahoma Taking Advantage Of Mexico’s Oil Boom

Oil rig dusk

With Mexico flinging the doors wide open to its vast oil wealth, with much of the hard work already done and the massive discoveries having already been made, more than a few eyes see dollar signs at the possible prospects.

Nowhere is this truer than in the U.S. state of Oklahoma, which is gunning for a piece of the Mexican oil pie, but not in the way that everyone else is: Oklahoma is a major manufacturer of oil and gas equipment, and it’s targeting a major new market now.

Since Mexico opened its oil and gas sector to private investment in 2013, ending a 75-year-long state monopoly in its energy industry, international companies have started looking for licenses to develop the country’s offshore reserves.

But not everything is about exploration and production licenses: Liberalized Mexican oil opens the door to a vast array of sub-sector benefits, too.

International oil companies taking advantage of Mexico’s open doors will be looking for contractors for technology and equipment, promising a secondary bonanza for a state that’s getting in on the game early.

The Oklahoma Department of Commerce believes that its local manufacturers of oil and gas equipment can use the state’s international trade promotion efforts to sell their products in Mexico. And they’re ready for the challenge of working across the border.

“In one or two years, demand for new production equipment will be very, very high,” Luis Domenech, director of international trade at the Oklahoma Department of Commerce, told FuelFix’s Lydia DePillis. Related: OPEC Confident In U.S. Shale’s Lack Of Longevity

Chances are, he’s spot on.

In March, Mexico saw its first international offshore drilling success—Italian oil major Eni SpA drilled the first well by an international oil company in Mexican waters, and said that the well indicated a “meaningful upside to the original estimates.”

At the Offshore Technology Conference in Houston earlier this month, Mexico’s Deputy Energy Minister Aldo Flores Quiroga said that his country would be happy to receive suggestions for offshore blocks to be included in the December bidding round for its section of the Gulf of Mexico.

Amid the expansion of Mexico’s offshore drilling industry and inclusion of international oil companies, Oklahoma oil technology manufacturers have more chances of winning export deals in Mexico.

But it will be difficult to reverse the trend of falling exports. According to the United States Census Bureau, Mexico is Oklahoma’s second-largest trade partner behind Canada. However, the value of Oklahoma’s exports to Mexico have been falling each year since 2013, from US$614 million in 2013 to US$537 million in 2016.

“They need to be patient,” Domenech told FuelFix, referring to the opportunities for small Oklahoma businesses.

Tulsa-based Everest Sciences, which manufactures and sells solutions for the petroleum, chemical processing, and power generation industries, has won a multimillion-dollar contract to supply three of its systems to Mexico’s state-owned oil and gas company Petroleos Mexicanos (Pemex). Related: Saudis Set To Cut June Crude Oil Exports To Asian Markets

The Oklahoma Department of Commerce is assisting small businesses in participating in international trade shows by paying part of their expenses. The nearest upcoming such show is the Mexico Petroleum Congress 2017 in June.

Oklahoma manufacturers have a chance to negotiate trade deals for Mexico’s offshore industry. But they may have to wait until current controversies and uncertainties over trade and taxes between the U.S. and Mexico are resolved. One is a proposed border adjustment tax, and another is the fate of the North American Free Trade Agreement (NAFTA) that has been in place since 1994.

Two weeks ago, the White House said—referring to President Trump’s conversations with the Mexican and Canadian leaders—that “President Trump agreed not to terminate NAFTA at this time and the leaders agreed to proceed swiftly, according to their required internal procedures, to enable the renegotiation of the NAFTA deal to the benefit of all three countries.”

Assuming no more cogs in the wheel of trade policy that could hit at anticipated profit margins, Oklahoma’s oil equipment manufacturers stand to win big on this one.

By Tsvetana Paraskova for Oilprice.com

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