The Mexican Oil Bonanza

By Rudy Martin | 2008-05-19

For those with a longer term view, the energy situation in Mexico may be about to turn. Mexican President Calderon submitted a set of proposals last week to increase oil exploration and to attract international partners. This should provide a bonanza of contracts and orders for oil services companies.

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Depending on whether risk-taking drillers will be allowed this could also give a lift to international deep-water exploration companies interested in the Gulf of Mexico. No matter how this is structured one thing is for sure, Mexicans see the value in their national treasure, Pemex, eroding and they will do anything to protect it. Oil accounts for roughly 40% of Mexico’s budget, and Pemex needs reforms to achieve the successes of other national oil companies such as PetroBras, Statoil and Petronas.

Company News

• Petrobras (NYSE:PBR) stock market value rises to $288 billion, passing Microsoft which is in the midst of acquiring Yahoo!. In the last 90 trading days, PBR has risen 65% versus a 15% and 10% rise for MSFT and YHOO respectively.

• Embraer (NYSE:ERJ) The world's fourth-largest aircraft maker will invest $50 million in a new plant to make jets in Melbourne, Florida, . The factory, which will have the capacity to make the new Phenom 100 and Phenom 300 jets, will be Embraer's first for corporate jets outside Brazil.

• Sociedad Quimica y Minera de Chile SA (NYSE:SQM, SQM/B CC): Chile's biggest fertilizer and lithium producer is unaware of reasons for its share price gains in recent days, the Santiago-based company wrote in a May 16 response to a stock exchange query.

• Gruma SAB (GRUMAB MM): The Mexican foodmaker maker that controls more than a third of the U.S. market for tortillas raised 2.11 billion pesos ($203 million) in an additional share sale.

General News

• Mexican President Felipe Calderon submitted to Congress Wednesday proposed changes in tax rules for state oil monopoly Petroleos Mexicanos, or Pemex. The proposals also seek to promote development of difficult-to-reach reserves in deep water and the Chicontepec basin.

• Brazil's Sao Paulo state suspended environmental licenses for new sugar and ethanol mills while the government assesses the impact of the industry's expansion on air, water, soil and forests. Sao Paulo state accounts for about 60 percent of the country's sugar and ethanol output.

• Uruguay’s rice industry is booming. The country hopes to double production to two million tons. According to the FAO food prices in the twelve months ending March 2008 have jumped 130% for wheat, 74% for rice, 87% for soy and 53% for corn.