Unfortunately those rigs and platforms will not be in U.S. waters. Mexico's Petroleos Mexicanos or PEMEX is Latin America's largest oil producer. They have some very big plans to increase production and those plans don't involve waiting 6-9 months for the BOEMRE to approve a permit.
Mexico is suffering a serious decline in oil production as some of its major fields accelerate down the depletion road. Cantarell has led the decline but Pemex believes they can reinvigorate that field as well as others by an aggressive drilling program. More than 40% of Mexico's budget comes from oil revenues. At the present rate of decline they will be a net importer of oil by the end of the decade and be putting money out to buy oil rather than paying their bills with oil revenue.
In order to head off these undesirable future Pemex plans to award $5 billion in contracts over the next two years to build 50 new production platforms in the Bay of Campeche in the Gulf of Mexico. The platforms will be used at developments including Ayatsil and Tsimin.
Companies that may benefit from the building program include Carso Infraestructura & Construction SAB, known as Cisca and owned by Carlos Slim. Another would be Empresas ICA SAB, Mexico's largest construction company.
Ayatsil and Tsimin are located on fields that contain 622 million barrels of proven reserves based on Pemex estimates.
In addition to the 50 platforms, Pemex said it plans to operate "around 40" shallow water drilling rigs in the Gulf. If successful Pemex hopes to boost its production for the first time in seven years.
Pemex will soon begin issuing contracts for 15 additional jack-up rigs and crews to operate in the Gulf. Pemex is going to extend existing leases on up to 25 rigs currently under lease. Some rigs will be replaces by newer and better featured rigs. Mexico plans to lease rather than buy in order to cut the lead time and acquire newer equipment.
Pemex is going to target 85% of its $23 billion investment budget for exploration and production. The plans by Pemex don't require approval by U.S. regulators.
Noble Corp (NE) said at an energy conference "Pemex remains committed to the jack-up rig business but it remains to be seen when they will actually commit to contracts." Noble has the second largest fleet of offshore rigs.
I am sure other players are going to be lining up rigs deals as well. Hercules Offshore (HERO) also has a large inventory of jack-ups. Transocean Offshore (RIG) and Diamond Offshore (DO) also have jack-ups but are more focused on their deepwater business.
Whoever gets this business will probably see it turn into a long-term relationship. In order for Mexico to prevent another dramatic downturn in production they need to mount an aggressive and long lasting drilling program that could last a decade or more.
Mexico is a major exporter of crude to the U.S. and a source without any significant geopolitical concerns. President Obama has already vowed to continue the existing trade with Mexico because is makes sense. Transportation is simple and the U.S. can provide defensive protection that close to our shores if some new threat appeared on the horizon. Having Mexico and Canada as our top two crude suppliers is an easy decision. The president has also vowed to become a big customer for Brazil's deepwater discoveries. Who knows, within ten years we may not have any need for OPEC oil. Surely the BOEMRE will have their act together soon and we can produce our own oil as well.
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The OilSlick Newsletter is based on the expectations for global oil production of light sweet crude to peak and begin to decline in the 2012-2014 timeframe. I am calling this "Peak Sweet™" instead of Peak Oil. This is the point where global production of conventional light sweet crude supplies can no longer be supplemented by enough oil sands production, deepwater oil production, biofuels and natural gas liquids to offset the decline in existing fields. The roughly 6% annual decline of existing production due to depletion is larger than the rate of new discoveries and new production being added each year. The Peak Sweet™ countdown clock is ticking and time is growing short. Peak Oil will arrive shortly thereafter. Are you prepared?