By ADAM WILLIAMS
Mexicos reliance on oil exports to its northern
neighbor is being jeopardized by the US shale boom, forcing
suppliers to seek new buyers, Citigroup said.
Mexico, which exports about 880,000 bpd of crude to the US,
is being pushed out by its chief trading partner
as demand diminishes, according to Ed Morse, global head of
commodities research at Citigroup in New York.
US imports of Mexican crude fell 13% to the lowest in more
than 20 years in 2013 because of increased domestic
production, according to the US Energy Information
Somethings got to give, Morse said in an
interview at the Institute of the Americas energy conference
in La Jolla, California. The US has not been a good
neighbor to Venezuela or Mexico in the way the shale
revolution has unfolded.
Production of tight oil and shale gas accounted for almost
90% of the USs crude growth the past two years as the
country nears a historic high in output, according to the
EIA. Hydrocarbons, including natural gas, crude and petrochemical
exports, are now the
countrys largest export product, Morse said. The US is
the worlds biggest exporter of petroleum products, he
State-owned Petroleos Mexicanos announced this week that it
will send its first shipment of Olmeca light crude to
Switzerland in July. Pemex, as the company is known, also
announced shipments of light crude to Hawaii, Japan, India
and California this year.
Pemex has lost around 300,000 barrels of daily exports
to the US in the last few years and are certainly starting to
make it up by selling Olmeca into Europe
and the Pacific
basin, Morse said. That can only go so far
because their basic refining
center is the US Gulf of
Mexico, which limits market expansion
, he said.
Mexico passed legislation last year to end Pemexs
75-year oil-production monopoly and allow private companies
to enter the energy industry. Pemex, which has seen oil
output fall nine straight years to 2.5 million bpd from 3.3
million in 2004, is forecast by the government to add at
least 1 million bbl to daily production by 2025.
Mexico could produce as much as 4 million bpd of oil if
legislation is implemented appropriately and the industry is
properly regulated, Morse said. The country needs to enforce
stricter guidelines and transparency to ensure the safety of
new investments, he said.
The resource bases will not be the constraint to
reaching that targeted level of production, Morse said.
of foreign companies
will depend on whether the government can assure that
companies can surmount business practices that are deemed to
be illegal in most of the world.
Mexico took control of oil services contractor Oceanografia
SA on Feb. 28 after Citigroup alleged $400 million in loan
fraud. The Ciudad del Carmen, Mexico-based company, which
and support services
for offshore oil project
s, receives most of its
sales from Pemex contracts.