NEW YORK The
energy reform passed by Mexicos legislature in
mid-December has brought cautious optimism to the energy
Some sources say the
move should eventually spur demand despite many issues that
need to be resolved in an oil and gas industry that has been
under state control since 1938.
"This is a
transformational reform ... that will allow the country to
produce more energy at lower costs," Mexican president Enrique
Peña Nieto reportedly said at the signing ceremony for
the new law, which allows foreign companies to invest directly
into Mexicos energy economy, although extraction still
needs to occur in partnership with national operator
Petróleos Mexicanos SA de CV (Pemex).
While the move was
viewed positively by most sources, the lack of an open market
previously and challenges with the political system could slow
"There are a lot of
prospects, but its a ways away. Theres a lot of
political infrastructure still to be built," Kurt Minnich,
manager of Pipe Logix LLC, Tulsa, Okla., said.
"Its going to be
cautious in our view," Paul Vivian, principal of St.
Louis-based Preston Publishing Co., said. "As you see the
(domestic) oil and gas companies moving in, not until that
happens will the pipe opportunities come along in the sense
that they can drag their suppliers with them."
Sources also noted
that the Mexican market, while significant, lags far behind the
United States demand potential.
Mexicos rig count stood at 100 for November while there
were 1,782 rigs running in the United States as of Dec. 13,
data from Baker Hughes Inc., Houston, show.
While the changes
might take a while to trickle down for purely domestic players,
it is particularly good news for Tenaris SA, Luxembourg.
almost 100 percent of the (oil country tubular goods) demand in
Mexico through its just-in-time contract with Pemex, which also
provides additional visibility and understanding of drilling
plans," analysts for New York-based Citibank wrote in a
On the reform,
Citibank analysts wrote that "we expect the reform will be
concluded in 2014, with first contracts signed already by late
2014 or early 2015."
Citibank and Tenaris
didnt return calls seeking comment.