QGEP Seeks Stronger Brazil Presence, Guardado Says

Global oil majors from Exxon Mobil Corp. to Chevron Corp. are about to get the clearest indication yet of how far Mexican lawmakers will go to lure them into the largest unexplored crude area after the Arctic Circle.

Encana Corp. may sell more of natural gas assets as it attempts to further transition its portfolio into oil and liquids plays. Following recent deals to dispose of its natural gas assets in Wyoming’s Jonah field for $1.8-billion and some in Texas gas for $530-million, the company unveiled a $3.1-billion acquisition of Freeport-McMoran’s Eagle Ford properties. Not only does this provide Encana with a cash flow margin boost, it also serves as a bridge to the company’s longer cycle assets, according to Greg Pardy, an analyst at RBC Capital Markets.

Of this, there is no debate: The future of Mexico’s oil industry lies offshore, where billions of barrels of crude are locked under the sea floor in the Gulf of Mexico. The country’s deepwater frontier is promising, but successfully extracting offshore oil is expensive and technically difficult, and Petroleos Mexicanos, the state-owned oil monopoly known as Pemex, doesn’t have the financial resources to singlehandedly exploit the Gulf’s ample resources. So they’re going to bring in outside help.