As Repsol is on its way out, Chevron signs deal with Pemex

Last Friday, Canadian oil company Nexen agreed to a contract in which it commits to helping develop Mexico's fledgling nationalized oil company, Pemex. US based Chevron Corp. signed a similar deal with the Mexican oil/gas monopoly yesterday. Almost simultaneously, Repsol YPF announced that it'll be cutting back on its current projects in Mexico after consecutive years of declining return. As the AP reported yesterday, without gaining much needed infrastructural assistance from foreign companies, Pemex is likely going be left oil-less in the near future.

Pemex has signed similar agreements with Norway's Statoil ASA, Brazil's Petrobras and Royal Dutch Shell PLC because it lacks the experience and technology needed to develop deepwater oil and natural gas reserves in the Gulf of Mexico.

Pemex is forced to sign training agreements because Mexico's constitution bars it from forming joint commercial ventures with outside companies. Currently, it is not exploring in waters deeper than 3,000 feet (914 meters).

Pemex chief executive Jesus Reyes Heroles has said Pemex needs to boost exploration and seek outside expertise to replenish oil reserves that are currently set to last less than a decade.

In 2003, a law was passed enabling Pemex to sign 'training' contracts with foreign companies. In limiting foreign companies' involvement to helping develop Pemex's drilling capacity, these contracts are in accordance with the federal constitution's stipulation that Pemex's profits aren't to be shared with any other company. Subsequently, Pemex has jumped at the opportunity of getting some outside help and has, including the late additions of Nexen and now Chevron, signed such contracts with more than five foreign companies.

With the passage of the new law, many might have made the argument that Pemex's growing privatization tendencies were purely in the interest of strengthening the company's ability to one day act even more independently of foreign interests than it had previously. Now, it's apparent that Pemex intends to sign as many 'training' contracts as it will take to simply make Mexico's national oil industry an even more attractive project for foreign investors. Obviously, getting caught in this vicious cycle of reliance upon foreign assistance will make it nearly impossible for Pemex to ever recapture the strongly Mexican character it once enjoyed in the years immediately following its creation in 1938.