Mexican Oil:

Issues Affecting Potential U.S. Trade and Investment

NSIAD-92-169: Published: Mar 18, 1992. Publicly Released: Mar 26, 1992.

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Pursuant to a congressional request, GAO provided information on issues affecting potential future U.S. trade with and investment in Mexico's petroleum industry, focusing on: (1) recent trends in and primary factors affecting Mexican oil production and exports; (2) the views of U.S. oil-producing and oil service contractors and Mexican officials regarding principal barriers to and potential benefits of U.S. trade with and investment in Mexico's petroleum sector; and (3) U.S. efforts to assist Mexico's petroleum sector.

GAO found that: (1) during 1990, Mexico supplied about 12 percent of the net crude oil imported to the United States, ranking third as a source of net U.S. crude oil imports; (2) after declining from 1982 through 1986, Mexico's oil production and exports have averaged about 2.5 million barrels daily; (3) political and economic factors affecting Mexico's future oil production and exports include growing internal energy demands, limited exploration efforts, diminished investment, and competing demands for resources from other petroleum industry sectors; (4) Mexico's efforts to modernize operations are incomplete; (5) although many U.S. oil producers believe that they could benefit from opportunities to invest in exploration and development of Mexico's oil reserves, they are unwilling to provide management expertise or oil exploration funds, since Mexico continues to prohibit foreign and private oil investment; (6) Mexican officials stated that they had no need for risk capital or assistance from private or foreign companies; (7) U.S. oil service contractors cited an unclear tariff system and procurement practices that favor Mexican suppliers as the major barriers to trade in Mexico's petroleum sector; (8) both U.S. and Mexican officials cited such benefits as long-term market prospects, lower drilling costs, and reduced drilling times from increased U.S.-Mexican oil business; and (9) U.S. assistance to Mexico's petroleum efforts include the provision of loan guarantees, the financing of a feasibility study for the upgrade of two petrochemical facilities, and bilateral consultations to enhance energy cooperation.

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