Due to a general downturn in the world oil markets and continuing challenges for Pemex, Cotemar, Mexico’s premier oil services firm, had a difficult year in 2016. Among the problems it faced were multiple contractual cancellations by its sole client, Pemex. This eventually forced Cotemar to make unprecedented cuts to its workforce of over 2,300 employees.
Despite all this negative news, Cotemar anticipates things will be much more productive in 2017. This is primarily due to many of the new laws promulgated in 2013 taking effect, leading to what are anticipated to be unprecedented levels of foreign investment in Mexico’s oil sector.
Bad times in Campeche
Campeche is a Gulf state at the base of Mexico’s Yucatan Peninsula. Since the 70s, this state, with its stunning natural beauty, has been almost entirely reliant on Mexico’s oil industry. For decades, the industry thrived and no one worried about what a real downturn might bring. But starting in 2004, Mexico’s oil output sharply diminished, and people in Campeche began to feel the squeeze.
With an estimated 80% of the state’s economy dependent on revenues from oil extraction, when Mexico’s oil industry has downturns, the people of Campeche are often left with difficult decisions. Some families have been forced to keep their children home from school. Others have even turned to the alluring call of the illicit drug trade, able to make in one week what they may only be able to make in a year at what jobs are left, aside from those in the oil industry.
The downturn since 2004 has been particularly brutal. With oil output falling every year, by 2010 Mexico’s total oil production was a mere fraction of what it had been just 6 years earlier. This, by itself, led to extreme hardships for many Campeche families who relied on the oil industry for their livelihoods. To make matters worse, starting around 2010, the North American shale and tar sands deposits, which oil companies in that region had spent billions of dollars and decades researching how best to exploit, started coming online. These new sources of oil would go on to flood international markets, creating an historic glut of oil and driving prices to the lowest they have ever been, in terms of real dollars.
Eventually, President Nieto signed into law sweeping legislation that will open Mexico’s oil markets to levels of foreign investment never before seen. Cotemar fully expects this new era of privatization will bring about an oil boom that will dwarf the last.