Canadian oilpatch looks to Mexico for new business - Action News
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Canadian oilpatch looks to Mexico for new business

Canadian companies big and small are increasingly looking to Mexico to get a stake in the billions of dollars being spent in the country's newly opened energy sector.

Interest grows as Mexico opens up its energy sector to private investment

ATCO's Nancy Southern and Mexico's Energy Minister Pedro Joaquin Coldwell spoke in Calgary on Monday about the investment opportunities in the country. (Kyle Bakx/CBC)

With a lack of work in the oilfields of Alberta, Canadian companies big and small are increasingly looking to Mexico to get a stake in the billions of dollars being spent in the country's newly openedenergy sector.

TransCanadaand ATCO already have a presence in Mexico, with other companies like Suncorand SNC-Lavalinshowing interest.On Monday,ATCOCEO Nancy Southern described the country as having "vast opportunities available."

There is definitely a desire. Mexico is shaping up very nice.- Mark Salkeld,Petroleum Services Association of Canada

Mexico is welcoming private investment after the state-owned companyPetroleos Mexicanos (Pemex) has controlled every aspect of the oil and gas business for more than seven decades. Slowly, Mexico has begun inviting private companies to invest in everything from exploration, production, transportation, refining, storageand sales.

The timing is ideal considering the slowdown in Alberta's oilpatch.

"There is definitely a desire. Mexico is shaping up very nice," said Mark Salkeld, with the Petroleum Services Association of Canada. "You get into downturns like this and our member companies start looking international."

Canadian interest

Canadian energy companies have been involved in oil and gas production around the globe for decades. Salkeld himself has worked in Europe, Siberia and Australia during his career.

"You can find a Canadian in just about every oilpatch in the world, either on an individual basis or a company basis," he said.

Since oil prices began tumbling in 2014, tens of thousands of people have lost their jobsin Alberta, Saskatchewan andNewfoundland and Labrador, as corporate revenuesnose-dived.

Canadian companies want to operate in countries where there is a level playing field. Mexico is much closer than most other foreign locations,as crews can drive down equipment from Canada.
An oil worker looks up as the drill is pulled upward on the Centenario deepwater drilling platform off the coast of Veracruz in the Gulf of Mexico. (Associated Press)

In addition, Salkeld joked,"we have the technology to follow the geology under the Trump wall."

Mexico'sEnergy MinisterPedro Joaquin Coldwellsaid Monday in Calgary that the full implementation of the energy sector reform will take seven years, although some parts of the industry have already opened up to private companies.

Mexico's state-owned company has faltered in recent years with declining production and revenue, which led to the reforms. Pemexwasn't able to develop enough technology to unlock the country's reserves.

"We need to develop technologies for the new era of hydrocarbons," said Coldwell.

Creating all the new rules and regulations to unlock the energy sectorhas not been easy. Both the Alberta Energy Regulator and the University of Calgary are working with Mexican officials to transition to an open market.

"Disassembling that organizational structure as humanely as possible and architecturally designing a marketplace new system is a gargantuan task," said Harrie Vredenburg, with the U of C's Haskayne School of Business.

Billions worth of bids

Suncoris one of the 21 companies signed up to bid for some of Mexico's deepwater properties. Other firms includeExxonMobil, Shell, BP and Murphy Oil. Mexico will accept bids in December and they are expected to generate billions of dollars.

In the last year, Vancouver-basedRenaissance Oil wona bid for some smallonshore propertiesfromPemex.

Mexican officials say theyare meeting withSNC-Lavalinthis week, as the company is said to have aninterest inthe country's transmission grid expansion.

TransCanadaandATCOare involved in natural gas pipelines in Mexico.

Canadian technology

Mexico is trying to court international companies because the country lacks the technology desperately needed to boost oil and gas production. In particular, the country lacks expertise in fracking and deepwater drilling.
Jose Antonio Gonzalez, director of Petroleos Mexicanos, speaks during a press conference in Mexico City in February 2016. Mexico's state-run oil company has announced a halt to some of its exploration and production projects, while foreign investors are being welcomed. (Associated Press)

"[Canadian companies]have a lot of experience in unconventional resources. We have huge potential in that regard that we have not been able to exploit to the fullest," said FernandoZendejas, head of Mexico'sDepartment of Energy legal unit.

Currently there are no rules in place when it comes to fracking, but they are coming. Zendejassaid they will strive to protect the environment but not be as prohibitive as some European countries.

"There are some guidelines already, but it is not formal regulation. That's what we have been working on," he said.

The Canada West Foundation, a Calgary-based think-tank, has cautioned that investing companies will face risks, including violence, crime and uncertainty about the new regulations.