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Playing The Coming Mexican Oil Boom

For more than seventy years the oil reserves of Mexico have been the exclusive property of the state run oil company Petroleos Mexicanos, or Pemex. That changed at the end of last year when the Mexican parliament agreed to amend the country’s constitution and allow foreign oil companies in. That decision prompted many to start guessing who would benefit most, with the usual suspects, Exxon Mobil (XOM), Chevron (CVX) and BP (BP) heading most people’s lists. On Wednesday of this week, though, we found out why the big oil companies may not be the best way to play the coming Mexican oil boom.

In a move that surprised very few, the government announced that Pemex would be keeping 83 percent of the country’s proven and probable reserves; hardly a bonanza for the big boys, but, as I said, not that much of a surprise either. The reason is simple. While Pemex has been inefficient in exploiting the fields and it is hoped that the introduction of outside firms will force that situation to improve, it is the oil that they cannot get to, that located in shale fields and ultra-deep water that the Mexican government wants the foreign firms to help with.

For big oil this opens up some possibilities for sure, but they are in exploration with its attendant risks. Moreover, if the shale boom in the U.S. is any guide, smaller, more nimble firms will be the ones to benefit the most, at least initially. We could take a guess at which ones that will be, but this strikes…

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