BHP Billiton Ltd. (BHP.AU) moved to secure a foothold in
Mexico's oil and gas industry, penning a cooperation agreement with
state oil company Petróleos Mexicanos, or Pemex, that the
Australian miner hopes will turn into a long-term partnership.
BHP, the world's No. 1 miner by market value, said Friday it has
signed a memorandum of understanding to exchange technical
knowledge and experience in oil and gas with Pemex as the
Melbourne-based company looks to extend its reach in the petroleum
industry.
Pemex has been facing outside competition for the first time in
its 76-year history after, in the face of falling oil production,
the government last year pushed through Congress the constitutional
changes needed to allow in big multinational firms with technology
and cash.
BHP is meanwhile looking for new petroleum projects, having
finished many major developments elsewhere, including the US$1.5
billion Macedon gas project in Western Australia.
"We obviously wouldn't be here if we didn't think the
relationship would extend beyond the exchange of technical data,"
BHP's petroleum president, Tim Cutt, told reporters. Pemex couldn't
immediately be reached for comment.
BHP, which controls oil-and-gas assets in countries such as the
U.S., Trinidad and Tobago and Pakistan, is expected to become more
reliant on the petroleum industry for its earnings after a proposed
demerger of many unwanted assets including nickel mines and
aluminum smelters. Macquarie recently estimated petroleum will
account for 38% of earnings after the planned spin-off, from less
than 30% now.
Mr. Cutt said the company has the capacity to take on one or two
big petroleum projects globally.
"We see considerable opportunity in Mexico following the recent
economic reforms," he said. "This is a long-term opportunity for
us."
Pemex, which contributes around a third of federal budget
revenue, has for years run Mexico's oil industry with little
outside regulation. The new rules end Pemex's monopoly and allow
private firms to exploit Mexico's oil and gas through different
types of contracts.
Mexico will in February begin auctioning rights to 169 onshore
and offshore tracts under energy laws signed last month. The
process is expected to be completed by the end of 2015, with both
new and mature fields to be put up for bids.
Mr. Cutt said he is still waiting for the exact details of the
government's terms for private drilling, though.
Other companies are also signaling their interest, with BG Group
Chief Operating Officer Sami Iskander this week labelling it a huge
opportunity.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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