Mexico's Oil Production Set To Surge Under Any Privatization

A push to open Mexico’s energy market to private companies by Mexican President Enrique Peña Nieto will revitalize an inefficient and corrupt oil industry, helping make Mexico one of the most influential energy players in the Western Hemisphere, experts told the International Business Times Tuesday.

“I think if the president of Mexico can truly pull this off it will be a monumental change in global petroleum issues,” said Charles Ebinger, director of the Energy Security Initiative at the Brookings Institution in Washington. “Clearly Mexico has suffered going back to the 1938 nationalization of the industry by the lack of state-of-the-art foreign energy technology being used in Mexico’s oil and gas fields.”

Mexico is one of the 10 largest oil producers in the world and third-largest in the Western Hemisphere, according to the U.S. Energy Information Administration, but production has decreased since 2004, which has affected the economy.

In 2011, 16 percent of the country’s export earnings were in the oil sector, according to Mexico’s central bank. That same year 34 percent of the government's the total revenue came from the oil industry.

The state-owned energy company Petróleos Mexicanos (Pemex) is notoriously corrupt and uses antiquated technology, Pavel Molchanov, senior vice president of Energy Equity Research, said in an interview. He added that corruption, nepotism, bad management and lack of foreign capital all contributed to the decline in oil production.

If the amendment to a constitutional law banning foreign investments in the oil industry passes, then Ebinger said oil production in Mexico will increase exponentially.