The report says Mexico must take action to halt the decline in oil and gas production

Offshore workers

LONDON — Mexico faces many challenges in the energy sector in the run-up to the presidential election, according to Wood Mackenzie.

These include falling oil and gas production, the need for increased exploration, energy supply problems and public pressure to switch to renewable energy.

According to Adrian Lara, principal mining industry analyst in Latin America at Wood Mackenzie, regardless of the election result, the new government will have to set conditions for attracting more private investment in the country’s energy sector.

“Over the past five years,” he explained, “the Mexican government has committed to strengthening the role of state-owned hydrocarbon producer Pemex in the energy sector. However, there are limits to what Pemex can do in terms of taking risks and financing the investments necessary to develop industry infrastructure.”

Wood Mackenzie’s report, “Mexican Energy Sector Challenges for the Incoming Administration,” predicts that demand for oil and gas will grow by 2% this decade, while at the same time the country’s hydrocarbon production will continue to decline.

“Although non-Pemex production under production sharing agreements will increase by the end of this decade, this increase will not be enough to counter the downward trend,” Lara added. “There is a risk of a stronger decline in production after 2030 without major changes to the current government policy of banning new tender rounds for hydrocarbons or awarding exploration blocks.

“Mexico’s energy security requires the availability of affordable energy sources. Integration with the U.S. energy market provides gas at competitive prices, but we believe the new government should evaluate policies that favor the development of untapped gas reserves.”