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Pemex is drilling in more than 3,000 feet of water from the Centenario Oil Platform in the southern Gulf of Mexico. Finally after 75 years of government blockage Mexico is seeking outside partnerships for its future.

Pemex has lacked the money and technical capacity to extract from its deeper waters.

With the Mexican Senate passing legislation opening its oil industry on December 10, 2013 the government is hoping that partnerships with foreign companies will mean billions of dollars of new reserves. The constitutional amendments will allow private investment into the country's oil industry.

The companies poised to benefit from the Mexican Senate vote to allow some foreign investment would be the large major oil companies which some analysts feel have no room to grow. These would be Exxon Mobil (NYSE:XOM), BP (NYSE:BP), Chevron Corporation (NYSE:CVX).

Pemex estimate that 50 billion barrels of oil reside in the depths of the gulf, more than all of Mexico's proven reserves on land and in shallower waters.

The Centenario rig (one of four rigs Pemex is renting to make its first exploratory wells in deep water) is located in the Lakach Field. Of the 28 wells associated with those rigs, Pemex officials say they have found evidence of oil or gas at 15. The company's head of exploration and production, Carlos Morales, predicted that deep-water oil could one day account for as much as 30 percent of Mexico's production.

Going from test wells to production takes years of planning and huge investments to build the infrastructure to exploit the oil reserves. Pemex will not have the money to fund the deep water development according to Government Studies with losses on each unsuccessful well around 12bn USD. Pemex who is only planning to spend 26bn USD in 2014 which is far short of the 60bn USD estimated needed each year to properly exploit the deep water reserves.

The technical expertise needed is only available for using the major oil companies of the world. Pemex is not ready to attack these wells themselves. They will only probably play a part in the consortium with international companies. The rewards of the deep water plays will have to be large enough to provide the international companies a good return. It will still be a win-win situation as Pemex can start to reverse its 25 year slide in oil production. While the major international oil companies can take the lessons earned in the last 30 years and expand development the Gulf of Mexico.

I spent over a decade my working life with INTEC Engineering (a specialist deep water engineering firm) eventually serving as group controller. I accounted for the engineering of some of the largest deep water Gulf of Mexico projects. It always seemed insane to me that the fields in Mexico territorial waters (let alone the eastern gulf) were not being utilized.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: Pemex Going Deep? Only With Assistance From Major Players