6.250
%
Neutral
66
mm boe
84
%
While Mexico has made great strides in opening up the offshore, onshore remains a difficult place to operate, not only because of ingrained attitudes towards independents but also because of general working practices.
February 16, 2024
Americas - North
mm bbl
bcf
North America, bordering the Caribbean Sea and the Gulf of Mexico, between Belize and the United States and bordering the North Pacific Ocean, between Guatemala and the United States.
Multiple (PSC/Concession)
In December 2013, the Mexican Constitution was amended to loosen restrictions on the energy industry. These constitutional amendments represented a game changer for Mexico’s state-owned hydrocarbon resources, as the basis to expand the types and nature of hydrocarbon investment contract models with private investors.
Investors report the lack of a robust fiscal response to the COVID-19 crisis, regulatory unpredictability, a state-driven economic policy, and the shaky financial health of the state oil company PEMEX have contributed to ongoing uncertainties. The three major ratings agencies (Fitch, Moody’s, and Standard & Poor’s) maintained lower-medium investment grade ratings on Mexican sovereign debt. In July 2022, Standard & Poor’s upgraded the outlook from negative to stable but maintained its BBB sovereign rating for Mexico. Moody’s downgraded Mexico in July 2022 to Baa2 with a stable outlook. Fitch reaffirmed its BBB- sovereign rating in November 2022. Moody’s downgraded credit ratings for PEMEX debt from non-investment grade speculative (Ba3) in July 2021 to highly speculative in January 2023 (B1). Fitch reaffirmed its non-investment grade speculative rating (BB-) for PEMEX, while S&P maintained a lower medium investment grade rating (BBB) citing the likelihood of extraordinary government support should the company suffer financial distress. Uncertainty about contract enforcement, insecurity, informality, and corruption continue to hinder sustained Mexican economic growth. Efforts to reverse the following reforms further increase uncertainty: (1) 2013 energy reforms, including the March 2021 changes to the electricity law (found to not violate the constitution by the supreme court on April 7, 2022, but still subject to injunctions in lower courts); (2) the May 2021 changes to the hydrocarbon law (also enjoined by Mexican courts), and; (3) the September 2021 constitutional amendment proposal prioritizing generation from the state-owned electric utility CFE. These factors raise the cost of doing business in Mexico.
Source: ESRI, Heritage Index, HMG Foreign & Commonwealth Office, US Department of State, International Trade Administration, International Law Review, Ernst & Young, Wood Makenzie & OGA data.
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